Job Market Paper
Abstract: This paper examines how returns to colleges and majors, admission policies, and student sorting affect intergenerational mobility. I study this question in Denmark, where tuition-free colleges and generous living grants provide an ideal setting to investigate the sources of inequality that remain in the absence of financial constraints. Leveraging GPA admission cutoffs from a centralized matching algorithm, I apply a regression discontinuity design to examine whether students from low socioeconomic status (SES) benefit from selective degrees (college-major pairs). Scoring just above the cutoff for admission to a more selective degree raises low-SES students’ income by 9% at age 30, partially closing the SES wage gap. I develop a joint model of degree selection and labor market outcomes, to disentangle the contribution of degree-specific returns from that of students’ degree choices as sources of inequality. The model accounts for the impact of degree peer composition on outcomes. Estimates from the model reveal that returns to degree enrollment are higher for low-SES students than for high-SES peers across the distribution of degree selectivity. Furthermore, I find that the current GPA-based meritocratic admissions system is inefficient in terms of maximizing long-term earnings. Implementing need-affirmative admissions could reduce the SES wage gap by 15% through upward mobility of disadvantaged students, without adversely impacting displaced high-SES students. Notably, the SES wage gap could be eliminated if students selected degrees based on expected earnings returns.
Working Papers
Pricing Neighborhoods (with James Heckman & Sadegh Eshaghnia)
NBER Working Paper #31371 (under review)
Abstract: Education in Denmark is freely available. Despite near equal teacher salaries and per-pupil school expenditure across districts, there is substantial spatial heterogeneity in school quality as measured by teacher quality and student test scores. We argue that this is due to sorting of teachers and students across neighborhoods. We develop and apply multiple methods for identifying parental valuation of measured school quality in the presence of strong neighborhood sorting. There is strong concordance in the estimates across diverse methodologies. We estimate a willingness to pay of about 3% more for a house with average characteristics when test scores are one standard deviation above the mean. Controlling for selection into neighborhoods only slightly reduces our estimates. Given that school quality, as measured by monetary resources, is equalized across all neighborhoods, payments for school quality embodied in housing prices are in fact payments for peer, teacher, and neighborhood quality. This evidence challenges the appropriateness of the current emphasis in the literature on Tiebout-based models of neighborhood choice that stress sorting on parental income in order to finance the local public good of school quality. Rather, a model of neighborhood choice to select neighbor and peer quality is more appropriate. Our evidence is consistent with evidence that cash expenditures on classrooms have weak effects on child achievement.
Press : Berlingske
The Dynastic Benefits of Neighborhood Sorting (with James Heckman & Sadegh Eshaghnia)
Abstract : Using rich longitudinal data from Denmark, this paper uses a variety of empirical strategies to estimate the benefits of parental neighborhood sorting, as captured by better neighborhood and school peers, and teacher quality. Attending better schools significantly impacts later life outcomes of children, including increasing college graduation and wages while reducing criminal activity and teenage pregnancy. Linking these effects with the cost of sorting to neighborhoods, we estimate a private internal rate of return in the range 4%-15%.
Neighborhood Effects and Children’s Long-Term Outcomes (with Sadegh Eshaghnia)
Draft available upon request.
Abstract : Does growing up in a better neighborhood have positive consequences on long term labor market outcomes and educational attainment? We exploit a unique spatial dispersal policy that randomly resettled refugees across neighborhoods in Denmark from 1986-1998. We find that a higher quality neighborhood—as measured by the wage outcomes of permanent residents—is significantly associated with increased market income in adulthood. Our mediation analysis reveals that the association between neighborhood quality and child adult income is fully mediated through the impact of assigned neighborhood on parental income.
Selected Work in Progress
The Efficiency of Affirmative Action Policies (with Runzhong Xu)
Neighborhood Mobility over the Life Cycle, Sorting, and Segregation (with James Heckman & Sadegh Eshaghnia)