Non-pecuniary Returns Research Articles

Democratizing Finance: The “Citizen Fund”as an Institutional Proposal to Structurally Consider Non-Pecuniary Returns in Investment Decisions

An important element to explain the current multi-dimensional crises is the inability of capitalist institutions to consider non-pecuniary returns to investments (NPRI) in investment decisions. Orthodox economics highlights the creative force of the monetary profit motive, which translates into cultural habits and political decisions leading to overinvestment in harmful activities and underinvestment in desirable sectors. The flipside of this excessive trust in the monetary profit motive and markets is the weakening of the democratic institutions and the mistrust from the citizenry. Here, an archetype of a novel instrument for democratic finance is presented, to measure NPRIs, reconciling individual and collective action, harmonizing innovation, investment, and democracy.

Estimating pecuniary and non-Pecuniary returns to college education for academically marginal students: Evidence from the college enrollment quota policy in south korea

This paper investigates pecuniary and non-pecuniary returns to college education for academically marginal students in South Korea. The Korean government limits the number of admission slots at each college by assigning a quota for each year, and the quota is binding. An increase in the quota allows more academically marginal students to enter college. The IV estimation using differences in the ratio of 4-year college quotas to cohort size across regions and cohorts shows that 4-year college attendance of marginal students increases hourly wages by 60.3%-75.5%. College education also increases fringe benefits, life, and job satisfaction.

Maternal Labor Supply: Perceived Returns, Constraints, and Social Norms

We design a new survey to elicit quantifiable, interpersonally comparable beliefs about pecuniary and non-pecuniary benefits and costs to maternal labor supply decisions, to study how beliefs vary across and within different groups in the population and to analyze how those beliefs relate to choices. In terms of pecuniary returns, mothers' (and fathers') later-life earnings are perceived to increase the more hours the mother works while her child is young. Similarly, respondents perceive higher non-pecuniary returns to children's cognitive and non-cognitive skills the more hours a mother works and the more time her child spends in childcare. Family outcomes on the other hand, such as the quality of the mother-child relationship and child satisfaction, are perceived to be the highest when the mother works part-time, which is also the option most respondents believe their friends and family would like them to choose. There is a large heterogeneity in the perceived availability of full-time childcare and relaxing constraints could substantially increase maternal labor supply. Importantly, it is perceptions about the non-pecuniary returns to maternal labor supply as well as beliefs about the opinions of friends and family that are found to be strong predictors of maternal labor supply decisions, while beliefs about labor market returns are not.

Trade and Welfare (Across Local Labor Markets)

What are the welfare implications of trade shocks? We provide a sufficient statistic that measures changes in welfare, to a first-order approximation, taking into account adjustment in labor supply, in frictional unemployment, and in the sectors to which workers apply while allowing for arbitrary heterogeneity in worker productivity and nonpecuniary returns across sectors. We apply these insights to measure changes in welfare across commuting zones (CZs) in the U.S. between 2000-2007. We find that granting China permanent normal trade relations lowers the welfare of a CZ at the 90th percentile of exposure by 3.1 percentage points relative to a CZ at the 10th percentile; of this, approximately 65 percent is due to changes in unemployment and much of this is driven by the non-pecuniary costs of unemployment. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Jane Beats Them All: Price Formation and Financial Returns to Investing in Rare Books

I report historical prices and estimate financial returns to investing in rare books. My sample consists of 25 fiction titles recommended by Clifton Fadiman in his 1960 Lifetime Reading Plan. Relying on prices realized at American and British auction houses between 1975 and 2018, I use hedonic regressions to estimate the average rate of return to each of the 25 titles. Jane Austen’s novel Pride and Prejudice tops the returns to all other titles. I then construct for the entire sample of rare books price indices based on various specifications with a view to identifying the most efficient way of computing rare book price indices for larger samples of books. Estimating the financial return to investing in rare books in general, I arrive for the boom period 1975-2007 at a real rate of return of about 4.6%, which exceeds similar estimates for investing in fine art. In a comparison with the returns in 1975-2007 of almost 9% from the US stock market, investing in rare books is justified only by substantial nonpecuniary returns.

The benefits of adult learning: Work-related training, social capital, and earnings

We propose a regression-adjusted matched difference-in-differences framework to estimate pecuniary and non-pecuniary returns to adult education. This approach combines kernel matching with entropy balancing to account for selection bias and sorting on gains. Using data from the German SOEP, we evaluate the effect of work-related training, which represents the largest portion of adult education in OECD countries, on individual social capital and earnings. As the related literature, we estimate positive monetary returns to work-related training. In addition, training participation increases participation in civic, political, and cultural activities while not crowding out social participation. Results are robust against a variety of potentially confounding explanations. These findings imply positive externalities from work-related training over and above the well-documented labor market effects.

The Impact of Publicly Funded Childcare on Parental Well-Being: Evidence from Cut-Off Rules.

As more and more countries consider expanding public childcare provision, it is important to have a comprehensive understanding of its implications for families. This article adds to the existing literature by investigating the effect of publicly funded childcare on parental subjective well-being. To establish causality, I exploit cut-off rules introduced following the implementation of a legal claim to childcare in Germany. The results suggest that childcare provision strongly increases the life satisfaction of mothers who were previously constrained by the lack of childcare supply. The effect is more pronounced for mothers with higher labour market attachment. The coefficients for fathers are smaller and not statistically significant. As potential mechanisms, a wide range of time-use and labour market outcomes are explored. This shows that mothers indeed shift time from non-market activities to formal work in response to childcare eligibility, resulting in direct and indirect pecuniary and non-pecuniary returns to maternal life satisfaction. The findings shed light on key issues of work-family reconciliation and stress the importance of considering subjective well-being measures in family policy evaluations.

Information Provision and Postgraduate Studies

This is the first paper to experimentally examine effects of information provision on beliefs about pecuniary and non-pecuniary returns of postgraduate education, enrollment intentions and realized enrollment. We find that our treatment causally affects beliefs measured six month after treatment. The effects on beliefs differ by gender and academic background, and we find that stated enrollment intentions change accordingly: in particular males significantly adjust their beliefs and intentions to undertake postgraduate studies. We follow the students further and provide evidence on actual enrollment one year after treatment. Taken together, this study highlights the relevance of information provision on pecuniary and non-pecuniary labor market returns for postgraduate study decisions.

The Wider Benefits of Adult Learning: Work-Related Training and Social Capital

We propose a regression-adjusted matched difference-in-differences framework to estimate non-pecuniary returns to adult education. This approach combines kernel matching with entropy balancing to account for selection bias and sorting on gains. Using data from the German SOEP, we evaluate the effect of work-related training, which represents the largest portion of adult education in OECD countries, on individual social capital. Training increases participation in civic, political, and cultural activities while not crowding out social participation. Results are robust against a variety of potentially confounding explanations. These findings imply positive externalities from work-related training over and above the well-documented labor market effects.

The Wider Benefits of Adult Learning: Work-Related Training and Social Capital

We propose a regression-adjusted matched difference-in-differences framework to estimate non-pecuniary returns to adult education. This approach combines kernel matching with entropy balancing to account for selection bias and sorting on gains. Using data from the German SOEP,we evaluate the effect of work-related training, which represents the largest portion of adult education in OECD countries, on individual social capital. Training increases participation in civic, political, and cultural activities while not crowding out social participation. Results are robust against a variety of potentially confounding explanations. These findings imply positive externalities from work-related training over and above the well-documented labor market effects.

Soft and Hard Information and Signal Extraction in Securities Crowdfunding

We examine the impact of information flows on financing and the relative roles of hard information, soft information, and certification of issuer quality by third parties, using novel evidence from the US securities-based crowdfunding market. While hard information about the issuer’s financial condition and experience has only marginal relevance for offering outcomes, third-party certification of issuer quality as well as soft information about the issuer proxied by social media following plays a significant role in crowdfunding offerings. The relative roles of hard information and certification are greatest in offerings of more information-sensitive securities and when investors are less likely to derive nonpecuniary returns from participating in an offering. Further, there is evidence of partial substitution between different signals of issuer quality. Both third-party certification and issuer social media following are positively related to the valuation obtained by the issuer. Issuers tailor deal features, specifically, the choice of funding target flexibility and offering duration, to the level of information asymmetry about issuer quality. Finally, there is some evidence of geographic matching, with issuer characteristics and local availability of platforms affecting distance between issuers and platforms.

Estimating Pecuniary and Non-Pecuniary Returns to Education: Evidence from College Enrollment Quota Policy in South Korea

This study attempts to estimate pecuniary and non-pecuniary returns to college education for academically marginal students in Korea. The Korean government limits the number of admission slots at each college by assigning a binding quota for each year. An increase in the quota admits more academically marginal students to college. The Instrumental Variables (IV) estimation, using di erences in the ratio of four-year college quota to cohort size across regions and cohorts, shows that four-year college attendance of marginal students increases their hourly wage by 68.5%. College education also increases fringe bene ts, as well as life and job satisfaction.

Socio-Economic Gaps in University Enrollment: The Role of Perceived Pecuniary and Non-Pecuniary Returns

To understand the socio-economic enrollment gap in university attendance, we elicit students' beliefs about the benefits of university education in a sample of 2,540 secondary school students. Our choice model estimates reveal that perceived non-pecuniary benefits explain a large share of the variation in intentions to enroll. Expected job satisfaction, parental approval, and perceptions about social life during the 3-4 years after finishing secondary school are most important. Students with low socio-economic status perceive pecuniary and non-pecuniary returns to be lower. Beliefs explain 48% of the socio-economic gap in intentions to enroll, while perceived non-pecuniary returns alone account for 37%.

Socioemotional wealth in the family farm

Purpose – A family member may work for the family business even though the direct financial benefits he or she may receive in the form of a salary may be lower than what could be earned working for a non-family business. The lower amount may be accepted because of benefits of association with the family business. This psychic non-pecuniary return has been called socioemotional wealth in the family business research literature. The purpose of this paper is to propose a method to estimate socioemotional wealth and apply that technique to a group of family dairy farms to estimate socioemotional wealth for those family farms. Design/methodology/approach – A panel regression method was used to empirically allocate net farm income to the unpaid factors of equity, labor, and management provided by a family member in a family farm partnership. The estimated returns of labor plus management are compared to the market salary earned by farm managers who manage farms. The difference between the higher hired farm manager salary and what the family manager earns in the family farm from labor and management is an estimate of the non-pecuniary return the family member receives from managing the family farm as compared to managing the non-family farm. Findings – Differences in managers’ salary working for the non-family farm and the implied family manager financial compensation estimates indicate that family business managers’ non-pecuniary return from managing the family farm had an implied economic value averaging $22,026 per year over 1999-2008. Assuming that the manager would be indifferent between working for the family farm or the non-family farm if the sum of pecuniary and non-pecuniary returns were the same, the non-pecuniary annual benefits of $22,026 accrues in the form of socioemotional wealth associated as a member in the family business. Originality/value – Although the literature discusses how family members may accept a lower salary working for the family business than they could earn doing comparable work in a non-family business because of non-financial rewards they experience working for the family business, there have been no estimates of the value of this pecuniary benefit. The authors arrive at an estimate using a group of family dairy farm businesses that have multiple family managers.

The Pecuniary and Non-Pecuniary Returns to Voucher-Financed Training

This paper analyzes the returns to training that was co-financed by the German voucher program Bildungspramie. The estimation strategy compares outcomes of participants in voucher training with voucher recipients who intended to participate in training, but did not do so because of a random event like course cancellation by the provider of training. We find no impact of voucher training on wages, employment, job tasks and on subjective outcomes (in particular, the risk of job loss and job satisfaction). However, there is evidence that training participants report to better match the skill requirements of their job.

The Pecuniary and Non-Pecuniary Returns to Voucher-Financed Training

This paper analyzes the returns to training that was co-financed by the German voucher program Bildungspramie. The estimation strategy compares outcomes of participants in voucher training with voucher recipients who intended to participate in training, but did not do so because of a random event like course cancellation by the provider of training. We find no impact of voucher training on wages, employment, job tasks and on subjective outcomes (in particular, the risk of job loss and job satisfaction). However, there is evidence that training participants report to better match the skill requirements of their job.

Continuous training, job satisfaction and gender

Purpose– The purpose of this paper is to analyze the relationship between participation in further training courses and job satisfaction, focussing in particular on gender differences.Design/methodology/approach– Using data from the German Socio-Economic Panel (SOEP), a Probit-adapted OLS (POLS) model is employed which allows to account for individual fixed effects. The analysis controls for a variety of socio-demographic, job and firm characteristics.Findings– The authors find a difference between males and females in the correlation between training and job satisfaction which is positive for males but insignificant for females. This difference becomes even more pronounced when applying individual fixed effects. To gain insights into the reasons for this difference, the authors further investigate training characteristics by gender. The authors find that financial support and career-orientation of courses only seems to matter for the job satisfaction of men but not for the satisfaction of women.Practical implications– In Germany, financial support and career-orientation of training courses only seem to matter for the job satisfaction of men but not for the satisfaction of women. This has important implications for the investment in and outcomes of these training endeavors from both, a participant and an employer perspective.Originality/value– This paper extends the existing literature in several ways. The authors use job satisfaction as an outcome of training which comprises non-pecuniary returns in addition to monetary returns. In addition, the authors point out gender differences and examine the heterogeneity of training courses by gender. This seems important since job satisfaction processes differ to a large extent by gender and since it is well-known that training participation also differs by gender. The panel structure of the data enables a methodological advancement in terms of accounting for time-invariant unobserved heterogeneity which is likely to matter for the results.

Returns to MBA quality: Pecuniary and non-pecuniary returns to peers, faculty, and institution quality

A large literature has focused on estimating the returns to schooling and has typically done so by incorporating institutional heterogeneity in quality along merely one dimension (such as average SAT scores). Using longitudinal survey data of registrants for the GMAT exam and school level information from other sources, we create, in the context of graduate management education, multiple indices of school quality, and estimate the effect of these quality measures on multiple indicators of career success. In particular, we create quality measures of MBA programs based on: (1) institutional and curricular factors, (2) characteristics of the student body, and (3) characteristics of the faculty. We create aggregate quality indices by combining individual proxies using factor analysis. We also extend the literature by considering the effects of quality on both earnings and non-monetary outcomes, namely attainment of managerial goals relative to initial individual expectations, self-assessed skill gains, and various measures of job satisfaction. We include several unique individual control variables, and further control for unobserved heterogeneity through the use of instrumental variables and individual fixed effects. Results indicate that the quality of peers and schools may matter most for earnings. When individual fixed effects are included, estimates of quality premiums diminish somewhat, though the estimated premium associated with school quality increases, emphasizing the importance of controlling for selection into programs of varying quality. School quality is also an important predictor of several non-pecuniary outcomes.

Returns to MBA Quality: Pecuniary and Non-Pecuniary Returns to Peers, Faculty, and Institution Quality

A large literature has focused on estimating the returns to schooling and has typically done so by incorporating institutional heterogeneity in quality along merely one dimension (such as average SAT scores). Using longitudinal survey data of registrants for the GMAT exam and school level information from other sources, we create, in the context of graduate management education, multiple indices of school quality, and estimate the effect of these quality measures on multiple indicators of career success. In particular, we create quality measures of MBA programs based on: (1) institutional and curricular factors, (2) characteristics of the student body, and (3) characteristics of the faculty. We create aggregate quality indices by combining individual proxies using factor analysis. We also extend the literature by considering the effects of quality on both earnings and non-monetary outcomes: attainment of managerial goals relative to initial individual expectations, self-assessed skill gains, and various measures of job satisfaction. We include several unique individual control variables, and further control for unobserved heterogeneity through the use of instrumental variables and individual fixed effects. Results indicate that the quality of peers matters most for earnings, especially for OLS estimates. When individual fixed effects are included, estimates of quality premiums diminish somewhat, emphasizing the importance of controlling for selection into programs of varying quality. School quality is also an important predictor of several non-pecuniary outcomes.

Higher education and non-pecuniary returns in Germany: tracing the mechanisms behind field of study effects at the start of the career

This article addresses the question of why fields of study differ in early labour market returns. It is argued that the higher the potential training costs of a field of study the more problematic the labour market integration of graduates. This is due to the fact that employers use the occupational specificity and selectivity of a study programme as a signal for the expected training costs. In addition, the article suggests that structural relations between fields and occupations act as mediators for the effect of field of study on non-pecuniary returns. Using the German HIS Graduate Panel 1997, the results indicate that a lack of occupational specificity is partly responsible for differences between fields of study. Selectivity measures do not contribute to an explanation. As expected, working in the public sector and the required expertise for a job strongly mediate field of study differences.