Investment in financial literacy and saving decisions
Tullio Jappelli, Mario Padula 08 February 2011
Previous research has suggested that low levels of financial literacy can often be blamed for poor financial decisions by individuals, with knock-on effects for the wider economy. This column adds empirical evidence based on cross-country aggregate and micro-data, showing that indeed countries with higher financial literacy also have higher saving rates and greater wealth.
The demographic transition is increasingly shifting the responsibility of saving decisions from the welfare system to individuals. The switch from defined benefits to defined contributions pension systems is making individuals more liable for their long-term saving choices. In addition, the recent financial crisis has questioned people’s ability to manage their debts.
Education Financial markets
education, Financial literacy, savings rates
The virtuous equity-efficiency trade-off in educational outcomes
Richard B. Freeman, Stephen Machin, Martina Viarengo 04 January 2011
Many interpret countries' scores in international testing as grades of their national educational policies. Summarising evidence from international maths exams, this column finds that the highest-scoring countries are those with the least inequality in test scores, suggesting a “virtuous” equity-efficiency trade-off. It also finds that countries perform even better when test scores are highly correlated with the number of books in the family home.
How countries fare in international tests of student achievement is a magnet for media attention the world over. In December 2010, for instance, two of the world's leading newspapers, the New York Times, and The Financial Times reported on the remarkable scores of students from Shanghai in the latest Programme for International Student Assessment (Pisa) tests, which assess the reading, maths and scientific skills of the world’s 15-year-olds (Cook 2010, Dillon 2010).
education, equity, educational policy
The impact of university research on corporate patenting
Christian Helmers, Mark Rogers 21 December 2010
There is broad agreement that research at universities has knock-on benefits for innovation and the wider economy in general. The question remains “how?”. This column presents evidence from across the UK suggesting that local university research has a positive effect on the number local small firms that patent and that this effect strengthens the better the university.
University research is a catalyst for business sector innovations, according to several empirical studies (see for example, Agrawal 2001). Universities have a potential impact on firm innovation in a variety of ways including publication of fundamental research, university patenting and licensing, spin-offs and university incubators and science parks, joint research with firms, consultancy projects, the training of students and employees etc.
Competition policy Education Productivity and Innovation
productivity and innovation, education, Competition policy
Are skill-intensive imports from rich nations deskilling emerging economies?
Raphael Auer 10 December 2010
Do skill-intensive imports from rich nations reduce skill accumulation in emerging economies? This column presents new evidence from 41 emerging economies to suggest that being close to the global supply of skilled labour decreases domestic human capital. A one-standard deviation higher geographic proximity to skilled labour is associated with a 12% lower average education length of the country’s workforce. This may have profound consequences for the ability of poorer nations to catch up with richer ones.
Among economists and policymakers alike, there is now a sense of agreement that import competition from low-wage countries has caused a decline in the relative wage of unskilled workers in rich nations, probably best summarised by Krugman’s verdict that the impact of trade on wages “is big, and getting bigger” (see Krugman 2007 on this site).1
Development Education International trade
development, education, wages, international trade, emerging economies
The historical roots of inequality
Graziella Bertocchi, Arcangelo Dimico 14 November 2010
US commentators regularly lament the country’s racial and ethnic inequality. This column presents data from 1870 and 1940-2000 to argue that the divide has its roots in the slave trade and that its legacy persists today through the racial inequality in education.
In March 2010 President Obama presented the US Congress a plan to reform No Child Left Behind (NCLB), America’s main federal education programme. NCLB was enacted in 2002 under President Bush with the full bipartisan support of Congress. Yet one of the criticisms to NCLB stresses its failure to reduce the deeply rooted racial and ethnic gaps that still afflict the US education system.
Education Poverty and income inequality
education, US, slavery, racial inequality
Childcare subsidies and child wellbeing
Chris Herbst, Erdal Tekin 09 October 2010
Do subsidies for childcare succeed in getting parents to work and improving the wellbeing of the children? This column presents evidence from the US suggesting that childcare subsidies have an unintended consequence. In the short run, children from low-income families are worse off as their parents go off to work and they receive low-quality childcare.
Childcare subsidies are increasingly used by state and local governments to facilitate employment and reduce welfare use among economically disadvantaged families in the US. Most public expenditures on child care assistance in the US are funnelled through the federal Child Care and Development Fund (created as part of the 1996 welfare reform).
Education Poverty and income inequality
education, US, childcare
Producing superstars for the economic Mundial: The team in the tail
Lant Pritchett, Martina Viarengo 20 August 2010
In the World Cup, countries rely not on the average quality of their footballers, but on the quality of their best footballers. Could superstars also be crucial in economic competition? This column reveals that each year Mexico produces fewer than 6,000 world class mathematicians at age 15. If superstars do play any role in economic performance then this is particularly problematic, especially since the dominant policy attention is focused elsewhere.
In the World Cup (or Mundial in Spanish), the tails matter. Each nation’s destiny depends on the players on the pitch. The question is not which nation has the highest average quality of football players among its population nor which nation has the best single player but which country can assemble a team of 11 at their various positions, who can beat all comers. This depends on central tendency, the right tail, and the absolute size.
Development Education Labour markets Productivity and Innovation
development, education, Labour Markets, innovation
The effect of home computer use on children’s outcomes
Ofer Malamud, Cristian Pop-Eleches 21 July 2010
Do policies to bridge the digital divide, such as the One Laptop per Child programme, work? This column analyses a scheme offering vouchers for home computers to low-income families in Romania. It finds that while children’s computer skills and cognitive ability increased, academic achievement fell, suggesting that such policies should not overlook how children use these computers and the role played by parents.
There are large disparities in computer ownership both between and within countries. Estimates from the OECD's 2003 Programme for International Student Assessment (PISA) indicate that most 15 year old students in developed countries have access to a computer at home (91% in the US). In contrast, only about half of 15 year old students have access to a home computer in emerging Eastern European countries such as Latvia, Poland, and Serbia. Among 15 year olds in the bottom social economic status quartile within these countries, fewer than a quarter have access to a home computer.
Education Productivity and Innovation
education, Voucher schemes, digital divide, computers
The long-term impact of life before birth
Douglas Almond, Janet Currie 24 June 2010
The long-term effects of early childhood development are of increasing interest. This column outlines a recent literature review suggesting that interventions should target pregnant women as well as young children. But while events before birth can have a lasting impact, this does not mean that later efforts are doomed to fail.
The last decade has seen a blossoming of research on the long-term effects of early childhood conditions across a range of disciplines. In economics, the focus is on how human capital accumulation responds to the early childhood environment. This work has been spurred by a growing realisation that early life conditions can have persistent and profound impacts on later life. Cunha and Heckman (2008) and Cunha et al. (2010) estimate structural models in which initial endowments and investments feed through to later outcomes.
education, Early childhood, social interventions
The university as an internal labour market
Catherine M. Haeck, Frank Verboven 17 June 2010
How does a university organise its hiring and promotion policy? This column presents evidence on the personnel policy of a large European university. It suggests that the university is organised as an internal labour market, and while promotion dynamics depend on research and teaching performance, persistent administrative rigidities remain.
During the past decade policymakers have spent considerable effort to reform European universities. Aghion et al. (2008) provide a critical review of recent higher education policies and an agenda for desirable reforms. While European countries have coordinated quite intensively to reform their teaching programs and achieve compatible degrees throughout Europe, there has been little effort to coordinate reforms of the internal organisation of universities. As a result, European universities still show a large diversity in hiring, promotion, and tenure rules.
Education Labour markets
education, research, higher education, teaching