Dynamic Models of Human Capital Investment

My dissertation examines human capital investments and their role in individual's labor market outcomes. Chapter 2 analyzes how public school teachers decide to make human capital investments and the effects that these decisions have on their future labor market outcomes. In particular, I look at the decisions of employed teachers to obtain an advanced degree. Teachers' education and career decisions are modeled via a dynamic framework in the presence of teacher-specific unobserved heterogeneity. I find that teachers' decisions to obtain master's degrees are motivated by more than just an increase in salary. In particular, I observe teachers with master's degrees receiving a better draw on job characteristics, as measured by school quality, and that teachers are willing to pay between $1,500 and $20,000 to to move up one quartile in school quality. I also find that teachers value having broad access to online degree programs more than they dislike tuition costs. Counterfactual simulations by unobserved ability are consistent with a story that high-type teachers value both the salary increase and a better draw in career prospects, whereas low-type teachers are mostly interested in the salary increase.

Chapter 3 investigates the evolution over the last two decades in the wage returns to schooling and early work experience. Using data from the 1979 and 1997 panels of the National Longitudinal Survey of Youth, we isolate changes in skill prices from changes in composition by estimating a dynamic model of schooling and work decisions. Importantly, this allows us to account for the endogenous nature of the changes in educational and accumulated work experience over this time period. We find an increase over this period in the returns to working in high school, but a decrease in the returns to working while in college. We also find an increase in the incidence of working in college, but that any detrimental impact of in-college work experience is offset by changes in other observable characteristics. Overall, our decomposition of the evolution in skill premia suggests that both price and composition effects play an important role. The role of unobserved ability is also important.