Working papers

ABSTRACT

We present a theory of intergenerational persistence in college attainment (a Bachelor's degree, BD) guided by two well-documented empirical regularities: (i) patient individuals are more likely to be college graduates and (ii) patience persists across generations because parents choose to transmit it to their children, among other non-cognitive traits. To the best of our knowledge, we are the first to formalize and evaluate these mechanisms in a general equilibrium model. In the model, (i) and (ii) are endogenous outcomes implying college persistence. ``Standard mechanisms'', i.e., credit constraints, parental investments, or exogenous persistence in cognitive ability are not necessary. Theoretically, we characterize the conditions for college persistence and show that patience persistence is necessary for college persistence. Empirically, the baseline model without ability persistence, calibrated to U.S. data, matches college persistence and cross sectional inequality moments while accounting for 30% of earnings persistence. An augmented model, with exogenous ability persistence, reveals that ability persistence accounts for 80% of earnings persistence and 10% of college persistence. The remainder of college persistence is accounted for by endogenous persistence in patience. Ability persistence in the augmented model is a reduced form for the combined effects of the standard mechanisms. So, our finding that the standard mechanisms matter for earnings persistence is in line with the literature, while our finding that they matter little for college persistence, once patience is modeled, is new. We implement a policy experiment in which a college subsidy is financed via a proportional tax on labor income. The policy distorts intertemporal trade-offs and, hence, affects people differently depending on their patience. Overall college attainment and its persistence increase. Specifically, the policy raises the likelihood of a BD for individuals whose parents have a BD and it lowers that likelihood for individuals whose parents do not have a BD. This result differs from that of the existing literature where college subsidies alleviate credit constraints and reduce persistence.

ABSTRACT

The gender wage gap expanded between 1940 and 1975 but narrowed sharply between 1980 and 1995. We use a human capital accumulation model introduced in Ben-Porath (1967) to assess the role of gender differences in life-cycle profiles of market time and occupation sorting in explaining the gender wage gap dynamics over the long run. Men’s aggregate hours profiles changed little across cohorts, but women’s profiles converged to those of men, and especially so in higher-paying occupations. We calibrate the model to wage data by age, year, gender and occupation, and find that changing time allocation patterns induced human capital investments that account for nearly all of the gender wage gap dynamics. Occupation-specific human capital rental rates played a small role in helping close the gender gap since 1980. The roles of cohort-specific endowments, however, were less pronounced.

ABSTRACT

Wars create short-term fluctuations in mortality. Belligerents might mitigate their own casualties with larger armies that hinder their opponent’s fighting ability. But diseases are frequent in wars and, thus, may reduce the benefits of larger armies. First, I analyze these competing mechanisms in a dynamic model of wartime attrition. Second, I calibrate the model using U.S. Civil War data and find that if the Union had fielded a 50%-larger army in 1861, Union casualties would have been marginally lower. The theory provides the insight for this quantitative result.