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Dissertation Plan

Three Essays on the Economics of Skilled Labor

Daniel Kuehn

Doctoral Dissertation Plan

Chair: Robert Lerman

Committee Members: Mary Hansen, [???]

Overview

My dissertation will be comprised of three essays exploring the economics of skilled labor. The essays highlight the joint production of human capital through both formal education and work experience. Each essay takes a different approach to the economics of skilled labor. The first essay is an exercise in applied microeconomics that considers whether a tax credit designed to incentivize job creation has differential impacts across different education levels. Findings from this essay will have implications for the prospect of building skill levels through work experience for low educated workers. The second is an empirical and theoretical microeconomics essay exploring the importance of option value for major choice decisions when occupational outcomes are uncertain, with special consideration of science, technology, engineering, and mathematics (STEM) majors. The third is a theoretical macroeconomics essay that expands on Galor and Zeira’s (1993) model of income distribution and human capital investment to analyze the macroeconomic implications of apprenticeship.

Essay 1: The Employment and Earnings Effects of Job Creation Tax Credits by Education Level

Job creation tax credits (JCTCs) that subsidize marginal increases in employment are a potentially valuable tool for buttressing labor demand. Georgia, South Carolina, and North Carolina each administer geographically tiered JCTC programs that afford an opportunity to identify employment and earnings impacts by taking advantage of discontinuities in the tax credit. Assignment of the tax credit at the county-level rather than the individual-level also avoids the displacement bias in many individual-level studies. Building on previous research that I have conducted on Georgia’s JCTC program, this essay will explore the impact of this credit across all three states, by education level. If the JCTC is able to connect workers with low educational attainment to persistent, full time work the policy may provide additional avenues for building skills for these workers.

Essay 2: Occupational Choice and the Option Value of a STEM Degree

A recent literature suggests that students benefit from enrolling in college if the returns to a degree are uncertain in part because enrollment allows them to retain the option of graduating as they gather more information about their own abilities and potential payoffs. This option value of enrollment helps to explain why so many students choose to enroll and subsequently drop out of college. This essay considers the relevance of option value to the problem of occupational and major choice. Science, technology, engineering, and mathematics (STEM) occupations are generally well paid, socially prestigious, and intellectually gratifying. However, success in these occupations is highly uncertain and most STEM majors will never actually work in STEM occupations. A potential explanation of the decision to major in a STEM field despite the low probability of working in a STEM field is that a STEM major provides students with the option of pursuing a job in this field. This option would essentially be unavailable without a STEM degree. Option value provides a link between major choices and occupational choices and helps to explain major choices that often have a weak correlation with subsequent occupational choice. This essay will develop a model of the major and occupational choice where the option value of having a major in a field with limited job opportunities causes students to rationally major in a field at a higher rate than job opportunities are available in that field. The 2008 Baccalaureate and Beyond survey will be used to estimate the option value associated with obtaining a STEM degree.

Essay 3: The Macroeconomics of Apprenticeship and Income Distribution

Galor and Zeira (1993) develop an overlapping generations model in which credit market imperfections and human capital indivisibilities lead to long-run effects of initial wealth distributions. However, the specification of human capital indivisibilities as a dichotomous investment decision with no prospect of concurrent labor market participation excludes the possibility of apprenticeship arrangements that are critical labor market institutions in both developed (Germany, Switzerland) and developing (Ghana) economies. This essay will develop a model similar in character to Galor and Zeira (1993), where human capital investment decisions are structured by credit market imperfections and human capital indivisibilities, but it will add the opportunity to combine school and work in an apprenticeship arrangement. Following Mincer, human capital in subsequent periods is a joint product of prior schooling and labor market experience (which are integrated in an apprenticeship but not in formal education). The model will help to parameterize the conditions under which apprenticeships are growth enhancing, potentially providing an explanation of their differential emergence across otherwise similar economies.

Some personal goals:

–          Apply for Spencer Foundation dissertation fellowship specifically highlighting Essay 2

–          Apply for Department of Labor dissertation support, specifically highlighting Essays 1 and 3

–          Pull the essays together in enough time to contact Kevin Stange, Oded Galor, Joseph Zeira, Joseph Altonji, and Richard Freeman and ask for their thoughts

–          Policy think tank job market papers: Essays 1 and 2

–          Academic job market papers: Essays 2 and 3

–          Try to publish

–          Get a job

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