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How Responsive is Investment in Schooling to Changes in Redistributive Policies and in Returns?

  • Abramitzky, Ran

    (Stanford University)

  • Lavy, Victor

    (Hebrew University and University of Warwick)

This paper uses an unusual pay reform to test the responsiveness of investment in schooling to changes in redistribution schemes that increase the rate of return to education. We exploit an episode where different Israeli kibbutzim shifted from equal sharing to productivity-based wages in different years and find that students in kibbutzim that reformed earlier invested more in high school education. This effect is stronger for males and is largely driven by students whose parents have lower levels of education. We also show that, in the long run, students in kibbutzim that reformed earlier were more likely to complete post-high school academic colleges. Our findings support the prediction that education is highly responsive to changes in the redistribution policy, especially for students from weaker backgrounds.

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Paper provided by Competitive Advantage in the Global Economy (CAGE) in its series CAGE Online Working Paper Series with number 150.

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Date of creation: 2013
Date of revision:
Handle: RePEc:cge:wacage:150
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  1. Jeff Dominitz & Charles F. Manski, 1994. "Eliciting Student Expectations of the Returns to Schooling," NBER Working Papers 4936, National Bureau of Economic Research, Inc.
  2. Orazio Attanasio & Katja Kaufmann, 2009. "Educational Choices, Subjective Expectations, and Credit Constraints," NBER Working Papers 15087, National Bureau of Economic Research, Inc.
  3. Thomas J. Kane & Cecilia E. Rouse, 1993. "Labor Market Returns to Two- and Four-Year Colleges: Is a Credit a Credit and Do Degrees Matter?," NBER Working Papers 4268, National Bureau of Economic Research, Inc.
  4. Ran Abramitzky, 2008. "The Limits of Equality: Insights from the Israeli Kibbutz," The Quarterly Journal of Economics, MIT Press, vol. 123(3), pages 1111-1159, August.
  5. Moock, Peter R. & Patrinos, Harry Anthony & Venkataraman, Meera, 1998. "Education and earnings in a transition economy (Vietnam)," Policy Research Working Paper Series 1920, The World Bank.
  6. Aydemir, Abdurrahman & Sweetman, Arthur, 2006. "First and Second Generation Immigrant Educational Attainment and Labor Market Outcomes: A Comparison of the United States and Canada," IZA Discussion Papers 2298, Institute for the Study of Labor (IZA).
  7. Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.
  8. Philip Oreopoulos & Kjell G. Salvanes, 2009. "How large are returns to schooling? Hint: Money isn't everything," NBER Working Papers 15339, National Bureau of Economic Research, Inc.
  9. Abramitzky, Ran, 2009. "The effect of redistribution on migration: Evidence from the Israeli kibbutz," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 498-511, April.
  10. Christian Dustmann & Nikolaos Theodoropoulos, 2006. "Ethnic Minority Immigrants and their Children in Britain," CReAM Discussion Paper Series 0610, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  11. Charles T. Clotfelter & Michael Rothschild, 1993. "Studies of Supply and Demand in Higher Education," NBER Books, National Bureau of Economic Research, Inc, number clot93-1, July.
  12. Sakellaris, Plutarchos & Spilimbergo, Antonio, 2000. "Business cycles and investment in human capital: international evidence on higher education," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 52(1), pages 221-256, June.
  13. Brainerd, Elizabeth, 1998. "Winners and Losers in Russia's Economic Transition," American Economic Review, American Economic Association, vol. 88(5), pages 1094-1116, December.
  14. Victor Lavy & Analia Schlosser, 2004. "Targeted Remedial Education for Under-Performing Teenagers: Costs and Benefits," NBER Working Papers 10575, National Bureau of Economic Research, Inc.
  15. Christopher Avery & Thomas J. Kane, 2004. "Student Perceptions of College Opportunities. The Boston COACH Program," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 355-394 National Bureau of Economic Research, Inc.
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