Abstract: We model the joint distribution of time allocation decisions and actual graduation outcomes within a reduced-form dynamic model using two cohorts of the National Longitudinal Survey of Youths which we follow from 16 to 28. The model is estimated conditional on two latent factors measuring cognitive and technical-mechanical abilities which are allowed to be correlated with individual and family characteristics. Trajectories are characterized by the allocation of time (semesters) between various combinations of school enrollment with different labor supply modalities, and periods of school interruption devoted either to employment or home production. The results indicate that the impact of family income on cognitive and technical abilities has disappeared and that heterogeneity in family income played a small part in explaining dispersion in time allocation decisions in the 1980’s and even less so in the early 2000’s. Differences in abilities are by far the most important factor explaining individual trajectories. The reduced-form effects of income on high school graduation, on the incidence of post-high school enrollment and on college persistence have all vanished. College graduation and age at graduation are the only outcomes for which the importance of income effects have increased, but the increases are negligible compared with the importance of initial cognitive and technical abilities. Joint with Jorgen Hansen, Concordia University, CIREQ and IZA & Xingfei Liu, University of Alberta.

Organizers:

Benoît SCHMUTZ (Pôle d’économie du CREST)
Anthony STRITTMATTER (Pôle d’économie du CREST)
Sponsors:
CREST