Virginia Tech contributes significantly to social and economic progress at the regional, state and national levels through its teaching, research and public service activities. The study is motivated by the current debate on the appropriate level of support for higher education in Virginia's largest university. This study measures the benefits of the university's undergraduate teaching mission. The results suggest that a VT undergraduate degree significantly increases the lifetime earnings of the graduates and also leads to several other benefits to the graduate, to his/her family, and to society. This study can help policy-makers to better understand the important contribution of Virginia Tech's teaching mission to society, and thus make more-informed decisions regarding the appropriate level of support for higher education. / Master of Science

This dissertation examines the literature that attempts to measure the relationship between school quality and earnings. I begin by developing a simple economic model that predicts that, everything else being equal and with comparisons being made within a market, workers from higher quality schools will have higher earnings among those with the same level of schooling and they will have steeper schooling-earnings gradients. The remainder of this dissertation explores problems that exist in this literature for which no solutions have been presented. These problems include: 1) there doesn’t have to be a direct and positive relationship between school quality and earnings; 2) the data suggest that school quality measures are frequently mismatched to workers; 3) most school quality studies include college-trained labor while completely ignoring the quality of the college attended; 4) the omission of college quality from the estimation is especially problematic for studies that attempt to measure the school quality-earnings relationship through differences in schooling-earnings gradients for those educated in different systems; 5) state of birth wage rankings thought to capture a school quality effect are not invariant to the market (state of residence) in which they are evaluated; and 6) the evidence presented herein suggests that interstate migration is selective. These problems undermine the credibility of existing estimates of a school qualityearnings relationship.

We propose the use of methods based on the Shapley value to assess the fact that private returns to lower levels of educational attainment should incorporate prospective returns from higher attainment levels, since achieving primary education is a necessary condition to enter secondary and tertiary educational levels. We apply the proposed adjustment to a global dataset of private returns to different educational attainment levels and find that the corrected returns to education imply a large shift of returns from tertiary to primary schooling in countries at all income levels. (authors' abstract) / Series: Department of Economics Working Paper Series

Doctor of Philosophy / This thesis reports two tests of information-based theories of the returns to education, in the labour market for young Australians. The first is a test of whether these returns increase discontinuously with credentials such as high school graduation and university degrees. The second is a test of employer learning based upon how the returns to education, and to measures of ability not initially observed by employers, evolve with experience. These tests are conducted using a new data source which tracks individuals during the years in which they are entering and establishing themselves in the labour market, the period during which such credential and learning effects are most likely to be important. It is found that there are large and highly significant credential returns to completion of bachelor’s degrees, of 14% for males and 10% for females. For males, around 39% of the returns to 15 years of education (relative to 9 or fewer years) are attributable to credential effects, while the corresponding figure for females is 36%. These effects are stronger among workers who were recruited through hiring channels that convey less initial information to employers. There is also evidence that post-secondary admission or attendance without completion of a credential may itself have a sorting effect in the labour market. In the employer learning estimates, when parental education is used as a measure of ability observed by the researcher but not initially by employers, it is found to become increasingly correlated with wages as experience accumulates. However, no such result is found when a standardised test score is used as the ability variable – apparently because the information captured by this score is already observed by employers at the time of labour market entry. When the model is estimated separately by occupational class, the finding of employer learning holds only among white-collar workers. This may be due to the types of attributes that are reflected in parental education as a measure of initially unobserved ability.

Although human capital investment is often proposed as a solution to improve the labour market prospects of individuals who reach adulthood without obtaining a post-secondary credential, little is known about whether skills upgrading actually pays off. Using three national cross-sectional surveys on adult education as well as longitudinal data from the Panel Survey of Income Dynamics (1992-2005), I analyze how returning to school affects the earnings trajectories of men and women who enter the labour force with low levels of initial education. There are two major findings related to the earnings and advancement question. First, although both Canadian and American adults with low levels of initial education are significantly less likely than their more educated counterparts to participate in education and training, when they do participate, they are more likely to report it helped them increase their earnings. Second, these perceived gains are matched by substantial gains in actual earning growth. While the opportunity cost of returning to school is quite high – returnees experience a sharp drop in annual earnings during the years while they are in school – for both women and men, this investment yields a significant increase in earnings in the post schooling period. In addition, I address the question of why – if the earnings gains are so substantial – do so few less educated adults return to school? There are three key findings related to the participation question. First, even after accounting for a rich set of covariates, the effects of family of origin socio-economic status on educational attainment persist over the life course. Second, despite these enduring effects, current family and labour market dynamics matter as well. Consistent with the human capital model, I find evidence that, educationally disadvantaged individuals return to school to improve their labour market prospects. Taken together these results demonstrate that at least for some educationally disadvantaged adults, human capital investment is an effective strategy for labour market advancement. This conclusion challenges the standard ‘cumulative disadvantage’ view of adult education as simply another mechanism that serves to reproduce inequality.

This dissertation explores how different labor market policies implemented following the transition to market system in Eastern Europe affected labor market outcomes. As the result of different policies implemented countries of Eastern Europe that were very similar at the beginning of the transition achieved different economic outcomes. We focus on Lithuania and Ukraine that represent two groups of countries with respect to the broad approach to economic transition. Our analysis explores change in gender wage gap in the two countries as well as evolution in returns to human capital. We compare labor market institutions and composition of the labor force for these two countries. Labor market of the Soviet Union serves as a reference point for this comparison. The data from Household Budget Surveys is utilized for this analysis. Returns to education levels are examined in both countries. We find no evidence of increase in returns to higher education in Ukraine following the decentralization of the wage setting system. However, higher educated workers in Lithuania were able to benefit from the transition. The second part of this dissertation focuses on evolution of the gender wage gap. We decompose gender wage gap using Oaxaca decomposition as well as Juhn, Murphy, and Pierce decomposition. We consistently find that it is the “unexplained” component that is single handedly responsible for the gender wage differential in both countries.

Although human capital investment is often proposed as a solution to improve the labour market prospects of individuals who reach adulthood without obtaining a post-secondary credential, little is known about whether skills upgrading actually pays off. Using three national cross-sectional surveys on adult education as well as longitudinal data from the Panel Survey of Income Dynamics (1992-2005), I analyze how returning to school affects the earnings trajectories of men and women who enter the labour force with low levels of initial education. There are two major findings related to the earnings and advancement question. First, although both Canadian and American adults with low levels of initial education are significantly less likely than their more educated counterparts to participate in education and training, when they do participate, they are more likely to report it helped them increase their earnings. Second, these perceived gains are matched by substantial gains in actual earning growth. While the opportunity cost of returning to school is quite high – returnees experience a sharp drop in annual earnings during the years while they are in school – for both women and men, this investment yields a significant increase in earnings in the post schooling period. In addition, I address the question of why – if the earnings gains are so substantial – do so few less educated adults return to school? There are three key findings related to the participation question. First, even after accounting for a rich set of covariates, the effects of family of origin socio-economic status on educational attainment persist over the life course. Second, despite these enduring effects, current family and labour market dynamics matter as well. Consistent with the human capital model, I find evidence that, educationally disadvantaged individuals return to school to improve their labour market prospects. Taken together these results demonstrate that at least for some educationally disadvantaged adults, human capital investment is an effective strategy for labour market advancement. This conclusion challenges the standard ‘cumulative disadvantage’ view of adult education as simply another mechanism that serves to reproduce inequality.

The goal of this dissertation is to contribute to the new field of happiness economics which over the past several decades has substantially enhanced our understanding of cognitive judgment, human behavior, and the nature of happiness. Chapter 1 starts with a discussion of the subjective approach to measuring well-being and lays the foundation for the empirical work that follows in chapters 2 and 3. This approach has a strong appeal because ancient and modern cultures, and a long tradition in philosophy, view achieving happiness as the ultimate goal of human existence. It also recognizes that humans are the best judges of their own condition. In this first chapter, I discuss some common ambiguities related to the term happiness and outline some of the most common ways in which subjective well-being (SWB)data is measured. Next, I discuss how reliable subjective well-being data is and what are some of its strengths and weaknesses in the context of economic research. Some major insights from the growing literature on happiness economics are also provided and alternative approaches to measuring quality of life (and well-being) are suggested in the last section. One puzzle in the happiness economics literature has been that although real incomes have substantially improved over the past 40 years, happiness levels in the United States have stagnated. In chapter 2, I show that the rising level of income inequality in the United States since the 1970s can explain the stagnating happiness levels of Americans. First, using subjective well-being data from the General Social Survey, I estimate the concavity of the utility function within a neo-utilitarian framework of welfare analysis and calculate the Atkinson index of inequality. Although the estimates suggests that Americans have become increasingly more inequality-averse over time, the results suggest that the concavity of the utility function alone cannot explain the happiness patterns observed in the past several decades. Once I account for the negative external cost from economic inequality, however, the empirical analysis implies that economic growth has not been sufficient to compensate for the loss of subjective well-being associated with the rising level of inequality. This is consistent with the findings of several different surveys on subjective well-being. Finally, I evaluate the equality-efficiency trade-off in the US, and discover a small and positive trade-off. Chapter 3 considers another important policy topic in recent years -- the increasing cost of college tuition and the scrutinized value of higher education. Using subjective well-being data, I show that higher education has a large non-monetary (happiness) return that goes beyond the benefit of finding a better paid and more satisfying job. A person with a high school degree, for instance, would have to earn \$41,683 more per year to be equally as happy as somebody with a college degree that has a similar socio-economic background. This large non-monetary return is associated with better marriage, health, and parenting choices, and stronger social networks that translate into higher levels of interpersonal trust. The lion's share of this non-monetary return is earned in college while the majority of the returns from graduate school are associated with higher salary. This return varies among the different subgroups of the population. Women, for example, benefit twice as much from a college education as men, and this non-monetary return has slightly increased over time. This may explain, at least partially, the increase in demand for college education over the past 30 years, and the unprecedented rise in the price of college tuition. It is hypothesized that one way in which education works is to change the attitudes, values, and behavior of students. Higher education, for example, makes students more open-minded, tolerant, and risk-averse. Evidence in support of this hypothesis is found by estimating the coefficient of risk (and inequality) aversion. Finally, using subjective well-being data from the European Value Study, the average non-monetary return from higher education is also calculated for Europeans and compared to that in the United States. Although higher education is also found to have a positive effect on happiness in Europe, the non-monetary returns are much larger in the United States. Furthermore, contrary to the United States, the direct effect of education on happiness in Europe is substantial, while the indirect effect is negligible.

Doctor of Philosophy / This thesis reports two tests of information-based theories of the returns to education, in the labour market for young Australians. The first is a test of whether these returns increase discontinuously with credentials such as high school graduation and university degrees. The second is a test of employer learning based upon how the returns to education, and to measures of ability not initially observed by employers, evolve with experience. These tests are conducted using a new data source which tracks individuals during the years in which they are entering and establishing themselves in the labour market, the period during which such credential and learning effects are most likely to be important. It is found that there are large and highly significant credential returns to completion of bachelor’s degrees, of 14% for males and 10% for females. For males, around 39% of the returns to 15 years of education (relative to 9 or fewer years) are attributable to credential effects, while the corresponding figure for females is 36%. These effects are stronger among workers who were recruited through hiring channels that convey less initial information to employers. There is also evidence that post-secondary admission or attendance without completion of a credential may itself have a sorting effect in the labour market. In the employer learning estimates, when parental education is used as a measure of ability observed by the researcher but not initially by employers, it is found to become increasingly correlated with wages as experience accumulates. However, no such result is found when a standardised test score is used as the ability variable – apparently because the information captured by this score is already observed by employers at the time of labour market entry. When the model is estimated separately by occupational class, the finding of employer learning holds only among white-collar workers. This may be due to the types of attributes that are reflected in parental education as a measure of initially unobserved ability.

The issue of gender wage differentials has long been of interest not only to economists, but also to governments and policy makers. In the last few decades, the labour market outcomes for females seem to be improving; however, the gender pay gap persists globally and females still earn significantly less than males. However, labour market discrimination has not received the research attention it deserves in developing countries in general, and in Syria in particular. A wide variety of factors could influence the gender pay gap, such as human capital, job characteristics and social factors. In the Syrian context, social and cultural factors play an important role in determining the position of females in the labour market. However, most previous studies have ignored the effects of social factors on other variables. Therefore, this research investigates the indirect effect of social factors on wages through human capital and job characteristics. This thesis has two main aims: to examine the main determinants of earnings for men and women in Syria, and to investigate the existence and extent of discrimination in the observed gender wage differentials there. To achieve this, two methods were used. Firstly, the Mincerian wage equations were used to analyse gender wage determinants, then discrimination was estimated using Oaxaca’s decomposition. Secondly, General Linear Modelling (GLM) Univariate ANOVA was tested to reveal the main and interaction effects of the factors specified in the theoretical model. The data used in this research came from the Syrian Labour Force Survey (LFS) 2010 conducted by the Government through the Central Bureau of Statistics. The results indicated that human capital variables were vital in explaining individuals’ earnings. Also, job characteristics and social variables explained wages to different degrees. Rates of return to education were, on average, around 5%, with women’s returns being better for higher educational levels. All three groups of variables explained only 17.19% of the earning gap between men and women, leaving 82.81% that could be considered as labour market discrimination. The GLM models revealed that social factors have significant indirect effects on wages as, when adding these indirect effects to the model, the explained variance in wages increased from 35% to 55%. This research makes significant contributions to the field of gender wage differentials and discrimination in Syria. The results of this study could help the Syrian government to develop tailored policies for the Syrian labour market to narrow the gender pay gap as decreasing gender inequality would enhance productivity and foster economic growth.