This paper compares the allocative properties of markets and exams in an environment in which students differ in wealth and ability and schools differ in quality. In the presence of borrowing constraints, exams are shown to dominate markets in terms of matching efficiency. Whether aggregate consumption is greater under exams than under markets depends on the power of the exam technology; for a sufficiently powerful test, exams dominate markets in terms of aggregate consumption as well. The effects of income taxation are analyzed and the optimal allocation scheme when wealth is observable is derived. The latter consists of allowing markets to set school prices but having the government allocate fellowships based both on financial need and exam score.

Culture as Learning: The Evolution of Female Labor Force Participation over a Century, Most Recent Version: November 2007 (small modifications over August revision)

Women’s labor force participation has increased dramatically over the last century. Why this has occurred has been the subject of much debate. This paper investigates the role of culture as learning in this change. To do so, it develops a dynamic model of culture in which individuals hold heterogeneous beliefs regarding the relative long-run payoffs for women who work in the market versus the home. These beliefs evolve rationally via an intergenerational learning process. Women are assumed to learn about the long-term payoffs of working by observing (noisy) private and public signals. They then make a work decision. This process generically generates an S-shaped figure for female labor force participation, which is what is found in the data. The S shape results from the dynamics of learning. When either small or large proportions of women work, learning is very slow and the changes in female labor force participation are also small. When the proportion of women working is close to 50%, rapid learning and rapid changes in female LFP take place. I calibrate the model to several key statistics and show that it does a very good job in replicating the quantitative evolution of female labor force participation in the US over the last 120 years. The model highlights a new dynamic role for changes in wages via their effect on intergenerational learning. The calibration shows that this role was quantitatively important in several decades.

An early version of the model and a simulation were presented in my Marshall Lecture at the EEA, August 2006. The slides for this presentation are below.

Slides from Marshall Lecture Presentation, August 2006.

These are the slides I presented for the Marshall Lecture, EEA, Vienna, August 2006. They discuss the epidemiological approach as a way to separate the effect of institutions and other traditional economic variables from culture; they summarize research on the effect of culture on the work behavior of women; they introduce a model of culture as learning to explain the evolution of US female LFP over a century and show a simulation; lastly, they discuss open research questions.

For a discussion of the epidemiological approach, see the Palgrave Dictionary article (Fernández 2007). For the research on women and work see Culture: An Empirical Investigation of Beliefs, Work, and Fertility (Fernández and Fogli 2009) and Women, Work and Culture (Fernández 2007). The latter paper contains much of the material presented in these slides. It also introduces new evidence on culture and women's work based on answers to WVS questions about attitudes towards women across European countries using an epidemiological approach. Lastly, a quantitative model of culture as learning, along the lines sketched in the slides, is developed in Culture as Learning: The Evolution of Female Labor Force Participation over a Century (Fernández 2007).