Essays on education and the macroeconomy

Abstract

This thesis consists of three independent chapters, related by a common theme: the role of education in the macroeconomy. The first chapter considers the role of higher education policies in intergenerational mobility. Student loans and grants increase the possibilities for low-income students to attend college and earn high incomes later in life. For that reason, they are commonly assumed to increase intergenerational mobility. Instead, the chapter shows that education policies have another effect, working in the opposite direction: they reduce the relative importance of other components of earnings such as luck, while those components are a greater source of mobility. Which of the two effects dominates is an empirical question. To that end, the chapter develops and parameterizes a model of the markets for higher education and labor. The results show a trade-off between welfare and intergenerational mobility. The second chapter connects two disparate strands of literature on earnings inequality. On the one hand, skill-biased technological change describes how general equilibrium effects between different types of workers shape the income distribution. On the other, the literature on taxation suggests that incentives to accumulate human capital drive the earnings distribution. The chapter combines both approaches, underpinned by an empirical analysis of occupational skill data. It finds that incentive changes in taxation like those that occurred in the second half of the 20th century can lead to polarization of the labor market. The third chapter really concerns education in economics, rather than education in the economy. It analyses the completion times of students in top European PhD programs. These are comparable to their counterparts in the United States, with a median that is approaching six years and a higher average. The publication of the present thesis helps counter the trend.