We analyze the returns to education in a life-cycle framework that incorporates risk preferences, earnings volatility (including unemployment), and a progressive income tax and social insurance system. We show that such a framework significantly reduces the measured gains from education relative to simple present-value calculations, although the gains remain significant. For example, for a range of preference parameters, we find that individuals should be willing to pay 300 to 500 (200 to 250) thousand dollars to obtain a college (high school) degree in order to benefit from the 32 to 42 percent (20 to 38 percent) increase in annual certainty-equivalent consumption. We also explore how the measured value of education varies with preference parameters, by gender, and across time. In contrast to findings in the education wage-premia literature, which focuses on present values and which we replicate in our data, our model indicates that the gains from college education were flat in the 1980s and actually decreased significantly in 1991-2007 period. On the other hand, the gains to a high school education have increased quite dramatically over time. We also show that both high school and college education help to decrease the gender gap in life-time earnings, contrary again to the conclusion from wage premia calculations.
A key debate in research on corporate restructuring is whether this widespread and extensive transformation process made contemporary employment relationships more open—with firms relying largely on market forces to reward employees—or left them relatively closed, with wages remaining primarily a function of internal labor market systems, practices, and policies. Research in this arena has had conceptual and empirical challenges in clearly distinguishing between these contrasting perspectives, leaving open the question of whether corporate restructuring reflects a full-fledged transformation in wage patterns, determinants, and outcomes, or instead erosion around the margins. We seek to resolve this debate by extending, refining, and assessing a rent-destruction account of the effect of corporate restructuring on employment relationships—which we contrast with internal labor market approaches. Results from analyses of 25 years of personnel records from a Fortune 500 energy-sector firm are consistent with the rent-destruction account: employment relationships became more market-based following the onset of corporate restructuring—albeit with production workers’ contracts seemingly becoming more open than those of managers.
We utilize three sets of data resources-the Health and Retirement Study (HRS), linked Social Security earnings records of the HRS respondents, and publicly available pension plan descriptions-to study pension wealth accumulations among the recent HRS cohorts. We document the trends in pension wealth over time and across cohorts during a period in which the economic consequences of the Great Recession were significant. However, given that pension wealth of many respondents were imputed in earlier waves due to the lack of information about pension plan provisions, there is the question of how much of the changes in pension wealth should be attributed to errors in imputation. The recently available pension plan descriptions from private employers' Form 5500 filings and public employers' websites, which improve the respondent-plan linkage over what was available in previous waves, allow us to examine this exact question. In particular, we show that the newly available sets of information not only reduce the need for imputation, but also enable us to identify the plans not reported by HRS respondents in the survey and the retirement wealth associated with these plans. Finally, we also test the validity of the earnings projection methods used to produce Social Security and pension wealth estimates in the HRS, and we end our report with a discussion over the pros and cons among the projection methods.
Yogo, and seminar participants at the University of Illinois at Urbana-Champaign, the LERA Conference and the NBER meetings for helpful comments on this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
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