A Nudge to School: Triangulating the Gains

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 07.06.2017, 12:15 - 13:30


Presentation by 

Hoyt Bleakley (University of Michigan)


Recent research and policies use (often small) incentives for students to increase their years of schooling. A working assumption justifying such incentives is that the optimal years of schooling is greater than that which would be otherwise be obtained by the target population. I combine this hypothesis with an older literature (e.g., Harberger 1971) that uses triangles to estimate approximate misallocation. Using well-identified parameter estimates from recent papers, I implement two strategies to measure the loss to a student from an underinvestment of (a somewhat implausible) four years of school. The upper bound of the present value of losses from supposed underinvestment in schooling is less than a few percent of lifetime income, in certain plausible cases. As these triangles are proportional to the square of misallocation and would thus be smaller by a factor of 8 with just one year of underinvestment.

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