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Econometrics and Applied Micro Seminar: The Labor Market Effects of Educational Expansion in an Extended Harris-Todaro Model

Dates:
  • Mon 17 Feb 2020 15.00 - 16.15
  Add to Calendar 2020-02-17 15:00 2020-02-17 16:15 Europe/Paris Econometrics and Applied Micro Seminar: The Labor Market Effects of Educational Expansion in an Extended Harris-Todaro Model

The purpose of this paper is to analyze an argument being made around the world: that increased investments in human capital and schooling would improve economy-wide labor market outcomes. The paper analyzes what would be the economy-wide effects of such educational expansion on employment, unemployment, wages, the educational wage premium, and total output.

The analytical starting point is the Harris-Todaro model (1970), which was honored as one of the top 20 papers published in the first 100 years of the American Economic Review’s existence (Arrow et al., 2011). In the original HT model, all workers were assumed to be identical. The present paper extends the HT model to allow for educational differences among workers and preferential hiring of the better-educated. This process is termed bumping : when more people are educated, more such preferential hiring takes place, with the less-educated being bumped out of contention for better jobs.

Four variants are developed. In each of them, as the number of educated persons increases further and further, the economy passes through a number of zones which exhibit markedly different behavior from one another. Although educational expansion may enable those who get educated to be hired into the better jobs, this will also have consequences for the less-educated. In one variant of the model, educational expansion renders the less-educated completely unemployable.

Seminar Room A - Villa La Fonte DD/MM/YYYY
  Seminar Room A - Villa La Fonte

The purpose of this paper is to analyze an argument being made around the world: that increased investments in human capital and schooling would improve economy-wide labor market outcomes. The paper analyzes what would be the economy-wide effects of such educational expansion on employment, unemployment, wages, the educational wage premium, and total output.

The analytical starting point is the Harris-Todaro model (1970), which was honored as one of the top 20 papers published in the first 100 years of the American Economic Review’s existence (Arrow et al., 2011). In the original HT model, all workers were assumed to be identical. The present paper extends the HT model to allow for educational differences among workers and preferential hiring of the better-educated. This process is termed bumping : when more people are educated, more such preferential hiring takes place, with the less-educated being bumped out of contention for better jobs.

Four variants are developed. In each of them, as the number of educated persons increases further and further, the economy passes through a number of zones which exhibit markedly different behavior from one another. Although educational expansion may enable those who get educated to be hired into the better jobs, this will also have consequences for the less-educated. In one variant of the model, educational expansion renders the less-educated completely unemployable.


Location:
Seminar Room A - Villa La Fonte

Affiliation:
Department of Economics

Type:
Seminar series

Speaker:
Prof. Gary Fields (Cornell University)

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