This thesis consists of four essays in applied microeconomics.
Chapter 1 studies the effects of parental job loss on various outcomes of children and provides new evidence on the heterogeneity of these effects along the cognitive ability distribution of children. I find that higher intelligence score protects children from the negative effects, but only in the long run. In the shorter term, instead of protecting, high ability exacerbates the cost of parental unemployment in terms of educational outcomes. This forces high-ability children with unemployed parents to start their careers at lower-paying jobs. Nevertheless, they can prove themselves via work performance and switch to better-paying jobs. I also provide suggestive evidence that their lifetime earnings could be higher had they continued their education.
Chapter 2 investigates the joint effect of local economic conditions on educational decisions and subsequent labour market outcomes using the instrumental variable approach. I find that adverse economic conditions at age 14 reduce educational attainment, except for the children aiming at university degrees. Second, exposure to a higher unemployment rate at age 14 reduces real hourly wages past age 40 until retirement. The IV estimator suggests that a year of education lost due to initial economic conditions corresponds to about 6-10% lower wages at ages 40-64.
Chapter 3, joint with Johanna Reuter, attempts to differentiate the degree attainment in the UK by type of higher education institutions. Historically higher education in the UK has been shaped by a dual system: elite universities on the one hand and polytechnics and other higher education institutions on the other. Despite the formal equivalence of both degrees, the two institution types faced different financing, target populations, admission procedures and subjects taught. Nevertheless, in survey data they are often indistinguishable. We overcome this problem using a multiple imputation technique in the UKHLS and BHPS datasets. We examine the validity of inference based on imputed values using Monte Carlo simulations. We also verify that the imputed values are consistent with university graduation rates computed using the universe of undergraduate students in the UK.
Chapter 4, joint with Michele Boldrin and Aldo Rustichini, studies the relationship between fertility decisions and intelligence. We show that, in contrast with a host of desirable life outcomes that are positively affected by intelligence, fertility is negatively associated, at least in advanced societies, with higher intelligence. The reason is analyzed in models describing the parenthood choice of individuals (in particular women) facing the trade-off between parenthood and career concerns. We test and find support for the model in the UKHLS panel survey.