Early Childhood, Primary and Secondary Schooling
1. Family Income and Child Achievement
Understanding whether increases in family income will improve child achievement and schooling outcomes is important for understanding intergenerational schooling and income relationships as well as the design of social and economic policy. Gordon Dahl and Lance Lochner exploit changes in the U.S. Earned Income Tax Credit in the 1990s to identify the causal effects of long-term increases in family income on children. Their estimates suggest larger effects that the previous consensus that failed to adequately address the endogeneity of family income changes.
Related Publications and Working Papers:
Dahl, Gordon and Lance Lochner, "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit," American Economic Review, August 2012.
Press References:
"What’s Not to Like About the EITC? Plenty, It Turns Out," Teresa Ghilarducci & Aida Farmand, The American Prospect, June 28, 2019
"Don't Increase the Minimum Wage, Raise the EITC Instead," Tim Worstall, Forbes, January 10, 2015.
"War on Poverty - It's Not a Lost Cause," Ann Stevens and Marianne Page, Los Angeles Times, January 8, 2014.
"How Children Could Suffer from a Weaker Safety Net," Dwyer Gunn, The Atlantic, December 13, 2012.
"Tax credits boost school performance, study shows," Sarah Cassidy, The Independent, August 22, 2005.
2. Borrowing Constraints, Early Family and Late Schooling Investments in Human Capital
Given the strong relationship between parental income and child achievement and educational attainment, economists have hypothesized that many lower income parents with young children may be borrowing constrained and unable to efficiently invest in their children. Using data from the U.S., Elizabeth Caucutt and Lance Lochner estimate that income received by families when children are young has a greater impact on child achievement and schooling than does income received by families when children are older. This indicates that borrowing constraints may, indeed, be a problem for many young families. Caucutt and Lochner then develop an overlapping-generations framework to analyze early family and late schooling investments in human capital when families and youth may be borrowing constrained. This research aims to identify the importance of borrowing constraints at different stages of life and the extent to which policies at one stage (e.g. post-secondary financial aid programmes) affect investment behavior at other stages. Flavio Cunha, James J. Heckman, Lance Lochner, and Dimitriy Masterov survey a vast multidisciplinary literature on early childhood and schooling investments. Interpreting this evidence through the lens of a lifecycle framework for human capital investment, they conclude that investments made at different stages of life are highly complementary.
Related Publications and Working Papers:
Caucutt, Elizabeth, and Lance Lochner, "Early and Late Human Capital Investments, Borrowing Constraints, and the Family," Working Paper, 2017-3.
Caucutt, Elizabeth, and Lance Lochner, "Borrowing Constraints on Families with Young Children," in Innovation in Education, Cleveland: Federal Reserve Bank of Cleveland, 2006, pp. 39-48.
Cunha, Flavio, James J. Heckman, Lance Lochner and Dimitriy Masterov, "Interpreting the Evidence on Life Cycle Skill Formation," in E. Hanushek and F. Welch (eds.), Handbook of the Economics of Education, Vol. 1, Chapter 12, Amsterdam: Elsevier Science, 2006.
3. Teacher Labor Supply
Recent research suggests the importance of teachers in determining pre-secondary and secondary outcomes. Thus, the labor supply decisions of teachers may have a substantial impact on students. In a series of papers, Todd Stinebrickner and co-authors provide new evidence about teachers’ work decisions. A common theme is that teacher labor supply decisions are strongly related to family factors. Indeed, unlike what might be expected given public dialogue, very few teachers leave teaching for non-teaching occupations.
Related Publications and Working Papers:
Scafidi, Benjamin, David L. Sjoquist, and Todd R. Stinebrickner. "Race, Poverty, and Teacher Mobility," Economics of Education Review, 26(2) April 2007, 145-159.
Scafidi, Benjamin, David L. Sjoquist, and Todd R. Stinebrickner. "Do Teachers Really Leave for Higher Paying Jobs in Alternative Occupations?" Advances in Economic Analysis and Policy, Berkeley Electronic Press, 6(1) January 2006, Article 8, 1-42.
Stinebrickner, Todd R. "An Analysis of Occupational Change and Departure from the Labor Force: Evidence of the Reasons that Teachers Leave," Journal of Human Resources, 37(1) Winter 2002, 192-216.
Stinebrickner, Todd R. "Compensation Policies and Teacher Decisions," International Economic Review, 42(3) August 2001, 751-779.
Stinebrickner, Todd R. "A Dynamic Model of Teacher Labor Supply," Journal of Labor Economics, 19(1) January 2001, 196-230.
4. Effects of Educational Vouchers When There are Peer Group Effects
One fear of opponents of educational voucher policies is that weaker students will be left in low quality public schools. Such an argument implies that the quality of the school depends not only on its financial resources, but on the students who attend. Determining the consequences of educational vouchers on human capital accumulation requires an understanding of how peer groups affect sorting across schools, and hence schooling outcomes. The difficulty with considering peer effects is that they cause an externality, so a parent’s decision depends on what other parents choose to do. To address this issue, Elizabeth Caucutt (2001) develops an applied general equilibrium club environment with peer group effects. Existence of equilibrium for the economy with a finite number of school types and with a continuum of school types is established, and the two welfare theorems are shown to hold for both economies. Caucutt (2002) uses this framework to study the effects of various educational voucher policies on the sorting of children across schools and the per student expenditure levels at these schools when a child's peer group matters and students differ over income and ability. Depending on the magnitude of the voucher, switching from a public system to a voucher system could entail either welfare gains or losses. All voucher policies under consideration lead to greater inequality than the public system; however, these increases are not monotone in the voucher size. This analysis is extended to a dynamic framework in Caucutt (2004). All voucher policies studied result in welfare gains and reductions in income inequality, while a completely private system entails a welfare loss and an increase in income inequality. The more important peers are to future income, the smaller the welfare gain and reduction in inequality associated with voucher systems and the greater the welfare cost and increase in inequality associated with a private system.
Related Publications and Working Papers:
Caucutt, Elizabeth M., "The Evolution of the Income Distribution and Education Vouchers," Macroeconomic Dynamics, 8 (2) 2004: 226-249.
Caucutt, Elizabeth M., "Educational Vouchers When There Are Peer Group Effects – Size Matters," International Economic Review, 43 (1) 2002: 195-222.
Caucutt, Elizabeth M., "Peer Group Effects in Applied General Equilibrium," Economic Theory, 17 (1) 2001: 25-51.
5. Effects of Family Structure on Investment in Children
There have been huge shifts in the patterns of fertility timing in the United States over the last 40 years. The percentage of children born to mothers over 30 rises from 36% to 44%. Elizabeth Caucutt, Nezih Guner and John Knowles (2002) develop a search model of marriage, divorce, and investment in children in order to understand the causes and effects of this demographic shift. Changes in the return to work experience for women are shown to partially explain the change in fertility patterns. The resulting changes in fertility and marriage affect children in two important ways. As women delay childbearing, more children are born later in their parent’s life-cycle, increasing the investments they receive. However, the shifts in fertility have also given rise to more single parents, who are unable to invest as much in their children as two parent families do. Quantitatively the latter effect dominates, and average investment in children falls.
The last few decades have witnessed an unprecedented retreat from marriage and traditional household structure among blacks. This has important implications for the living arrangements and well-being of children, which is likely to have significant intergenerational ramifications. In his well-know hypothesis, William J. Wilson argues that black women are marrying at lower rates because the pool of marriageable black men is small due to joblessness, incarceration, and early death. Previous work has found mixed results linking the availability of black men to low marriage rates. Caucutt and Guner examine whether taking into account not only black men who are currently unemployed or incarcerated, but also the probability that one becomes unemployed or incarcerated, can explain the racial marriage gap.
Related Publications and Working Papers:
Caucutt, Elizabeth M., Nezih Guner and John Knowles, "Why Do Women Wait? Matching, Wage Inequality, and the Incentives for Fertility Delay," Review of Economic Dynamics, 5 (4) 2002: 815-855.
Caucutt, Elizabeth M. and Nezih Guner, "Is Marriage a White Institution? Understanding the Causes and Effects of the Racial Marriage Divide," work in progress.
6. The Effect of Grade Retention
Research by Cooley, Navarro and Takahashi builds on the methodology proposed by Heckman and Navarro to study the importance of grade retention policies in elementary education. Increasingly, grade retention is viewed as an important alternative to social promotion, yet evidence to date is unable to disentangle how the effect of grade retention varies by abilities and over time. The key challenge is differential selection of students into retention across grades and by abilities. Applying new methods to address dynamic selection using nationally representative, longitudinal data, this research finds that the treatment effect of retention varies considerably across grades and unobservable abilities of students but is, in general, negative. Furthermore, the negative effect of retention on treated students generally diminishes as time since retention passes.
Related Publications and Working Papers:
Cooley, Jane, Salvador Navarro and Yuya Takahashi, "Identification and Estimation of Time-Varying Treatment Effects: How The Timing of Grade Retention Affects Outcomes," Working Paper, 2011.
Heckman, James and Salvador Navarro, "Dynamic Discrete Choice and Dynamic Treatment Effects," Journal of Econometrics, 136(2), 2007.
7. Charter Schools
The provision of school choice is often proposed as a way to improve educational outcomes for students in poorly performing public schools. Charter schools are at the center of the recent debate concerning education policy reforms in the U.S. In 2010, more than 1.6 million students attended almost 5,000 charter schools in 40 states. The number of charter school students would likely have been higher were it not for statewide legislative caps on the number of charter schools. There is considerable interest in the likely impacts of expanding the role of charter schools on student achievement.
Nirav Mehta develops and estimates an equilibrium model of competition between charter and public schools models three key components of the debate on school choice: i) student school choices, ii) charter and public school inputs, and iii) charter school entry decisions. The model incorporates selection on student ability in two ways: charter school entry decisions take into account market-level ability distributions, and within markets, student sorting is a function of heterogeneous student ability and inputs at both charter and public schools. Modeling student school choices as a function of both student and school characteristics allows for generalization of estimates based on existing charter schools to charter schools that might enter in new markets were caps lifted, even in the presence of student sorting on unobserved ability. The model of school input choices allows charter schools to have heterogeneous treatment effects across markets through variation in input provision and also predicts what inputs for public schools would have been in the absence of charters, which is necessary to properly quantify spillover effects: how charter schools have changed public school student performance relative to the monopoly scenario. Simulations indicate that the mean effect of charter schools on attendant students varies widely across locations, and is on average 11% of a standard deviation of test scores. The mean spillover effect on public school students is marginal, but positive, and lifting caps on charter schools would more than double entry but reduce gains for attendant students.
Related Publications and Working Papers:
Mehta, Nirav, "Competition in Public School Districts: Charter School Entry, Student Sorting, and School Input Determination," Working Paper, 2012.
8. Estimating Teacher Quality for Use in Accountability Regimes
The design and introduction of incentive pay schemes for teachers is a linchpin of education policy reform in the U.S. The vast majority of teacher remuneration is based on their experience and credentials, but only a small amount of variation in student achievement is explained by these measures. This has spurred a debate towards introducing incentive pay for teachers. Recently, this debate has moved from theory into actual education policies that affect large numbers of students and teachers, including President Obama's Race to the Top initiative, or the TAP program, which has introduced performance-based bonuses to over 20,000 teachers serving over 200,000 students across the US.
New research by Nirav Mehta compares the performance of two popular estimators of teacher quality that serve as inputs into teacher incentive schemes. By modeling administrators tasked with categorizing teachers using an exogenous cutoff, this research shows that the preferred estimator depends on the relationship between teacher quality and class size. While many researchers and applications have emphasized an Empirical Bayes estimator based on its statistical properties, an analysis of data from Los Angeles shows that the simpler fixed effects estimator outperforms the Empirical Bayes estimator when the objective is to minimize classification errors. Thus, administrators seeking to minimize these errors would prefer to use the fixed effects estimator to either reward high-performing teachers or sanction low-performing ones. Results further suggest that using the preferred estimator in Los Angeles would create 200 fewer teacher classification errors.
Related Publications and Working Papers:
Mehta, Nirav, "Targeting the Wrong Teachers: Estimating Teacher Quality for Use in Accountability Regimes," Working Paper, 2014-3.
9. Why Do Poor Children Perform Poorly?
The economic and social mobility of a generation may be largely determined by the time it enters school given early developing and persistent gaps in child achievement by family income and the importance of adolescent skill levels for educational attainment and lifetime earnings. After providing new evidence of important differences in early child investments by family income, Elizabeth Caucutt, Lance Lochner and Youngmin Park study four leading mechanisms thought to explain these gaps: an intergenerational correlation in ability, a consumption value of investment, information frictions, and credit constraints. In order to better determine which of these mechanisms influence family investments in children, they evaluate the extent to which these mechanisms also explain other important stylized facts related to the marginal returns on investments and the effects of parental income on child investments and skills. Their findings show that to explain the high marginal returns to investment among the poor, information or credit market failures are needed. Absent these market frictions, families will invest until the returns are driven down to or below the returns on savings. The timing of income is only important (if some parents are constrained in their borrowing. Otherwise, families can always use borrowing and saving to spend money when they want regardless of when it is received. If parents with young children are poorly informed about the value of investments and/or face limited borrowing opportunities, then policies designed to alleviate these market failures can improve economic efficiency while also improving the lives of those who are most disadvantaged.
Related Publications and Working Papers:
Caucutt, Elizabeth, Lance Lochner and Youngmin Park, "Correlation, Consumption, Confusion, or Constraints: Why Do Poor Children Perform So Poorly?" Working Paper, 2015-3.
Press References:
"The "Real Reason Why Poor Kids Perform Worse in School -- And in Life," Elizabeth Caucutt, The Washington Post, April 28, 2015.
"Why Do Poor Children Perform More Poorly Than Rich Ones?" Elizabeth Caucutt, The Conversation, April 23, 2015.
