Week 1 lecture notes on Education Economics

Tuesday, 13 August 2019 2:46 PM

1) Theodore Schultz, Prof at UC in 1960, proposed the idea that education ought to be
considered as a form of investment in human capital. He posits that even though earlie
avoided studying it as it appeared to reduce people down to a somewhat slave-like rol
Schultz believes that this view is mistaken. This is because he believed that education c
liberate free men to enhance their welfare by investing in themselves via education.
2) The alternative to the human capital theory is the signaling theory by economists, wh
people of high ability study and obtain educational credentials as a way to signal to em
that they are of high-ability based on the credentials that are conferred on them upon
completion of a prized educational programme.
3) Sociologists, and even most economists nowadays, now criticize human capital theory
looking at the non-cognitive skills which are cultivated in school, though not recognise
means of a formal document, but are eventually relevant or even important for succes
beyond the classroom.
4) Intergenerational persistence of economic status, for instance when highly educated p
have similarly highly educated children, also seem to run contrary to the human capita
theory's placement of value upon cognitive skills.
5) The approach of modern scholars of educational economics appears to be more data-d
theoretically agnostic (less interested in above debates) and is more micro-oriented (t
focused on specific policies, contexts rather than broad concepts).
6) Interesting paper on how a specific policy to provide a specific good (bicycles) is really
empirically-driven and then made popular due to its proven effectiveness.
https://www.aeaweb.org/research/india-bihar-bicycle-girls-education-program-karthi
muralidharan
7) One big idea that we will see is about the utility of education - whether is it based upo
returns on education for the purposes of fulfilling a post-industrial age role in society,
there value in education unto itself?

Causal relationships
8) When critically reading the papers and understanding the data, I need to be careful to
consider what the papers is doing, what the authors are saying and whether it is accur
not
9) Regression models/designs
a. 𝑌 = 𝛽$ + 𝛽& 𝑋& + 𝛽( 𝑋( + 𝛽) 𝑋) + 𝜀
- As a causal model, we can interpret β& as the causal effect of X& on Y, holding X
X) constant.
- Note that ε is the “error term” which represents all other variables that may infl
It is assumed that ε is statistically unrelated to the Xs
10) Understanding causal relations will help me to sharpen my theory and uncover my
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 a. 𝑌 = 𝛽$ + 𝛽& 𝑋& + 𝛽( 𝑋( + 𝛽) 𝑋) + 𝜀
- As a causal model, we can interpret β& as the causal effect of X& on Y, holding X
X) constant.
- Note that ε is the “error term” which represents all other variables that may infl
It is assumed that ε is statistically unrelated to the Xs
10) Understanding causal relations will help me to sharpen my theory and uncover my
assumptions.
11) Examples: X Y Z
12) Gender; Education; Race

13)

14) Education; Income; Cognitive ability

You cannot omit cognitive ability when considering the relation between education an
income!
15) Policy; Outcomes of interest; Behavioral change

16)

17) Number of police; crime; W: public concern about crime; Elections

X( and

luence Y

nd
The number of police is lowering crime, but even as the number of crimes go up, the n
of police will go up. Thus the co-relationship between these two variables will also req
scrutiny.