Economics 4372                                                                                                                 Spring 2012

M/W 2:30-4                                                                                                                          Dr. Juhn

M-106                                                                                                                                    Office: McElhinney 201-A


Economics of Education


Introduction:  This course is an upper level reading course on the economics of education.  The first part of the course will examine how technology and globalization has created the need for educated workers.  We will examine rising trends in wage inequality and college education premium, use a supply and demand framework to understand the recent trends, and assess competing explanations such as globalization, international trade, immigration, outsourcing, technological change, introduction of computers.  The second part of the course examines how education policies can meet the economy’s need for skilled workers.  It will begin with economic models of education: human capital investment theory and signaling theory.  We will examine the question: how large is the “true” returns to education and how do we measure it?  We will next turn to the recent literature on the effectiveness of school resources.  We will examine in turn different “inputs” into student achievement such as teachers, peers, and other school resources, private vs. public schools, and school accountability.   We will end the course by examining effective human capital policies and government intervention.


Readings: There is no official textbook for this course.  The following book is required and could be bought from Amazon.


Inequality in America:  What Role for Human Capital Policies?, Benjamin Friedman, editor. (Required)


The undergraduate labor economics textbook Labor Economics  by George Borjas (5TH EDITION) will also be an extremely useful reference.   The chapters which are relevant for Part II of the course will be put on E-reserve at the library.


Most of the readings are available on-line.  Click on the appropriate URL to access them on-line.  Many of the readings that are printed in economic journals such as the American Economic Review and Journal of Economic Perspectives are available through JSTOR (journal archive) available through UH library.  Go to the UH library site and click electronic resources and click JSTOR. You need login access to the UH library. Students are expected to read readings marked with (*) before lecture.


Students are encouraged to collect and bring into class articles that are relevant to the issues covered in class.  Good sources are The Wall Street Journal, New York Times, The Economist, and Business Week.  Check out  for timely articles on all sorts of education-related issues.


Prerequisites:  Students are expected to have completed Introduction to Statistics and Data Analysis (ECON2370) and have either completed or are currently enrolled in Intermediate Microeconomics (ECON 3332).


Requirements: There will be five quizzes on lectures and readings (worth a total of 20% of the final grade), one midterm (worth 20% of the final grade), and a final exam (worth 40% of the final grade). Groups of students will be assigned to “policy recommendation” teams. The teams will make a presentation of their policy recommendations towards the end of the semester.  Presentation and class participation will count for 20% of the final grade.  There will be no make-ups for the tests.  With valid excuses, the grade on the final will be re-weighted.  


Office Hours:  Wednesday 11-noon or by appointment.  It is generally a good idea to call ahead (x33823).


Course Outline


I. Wage Inequality and the Demand for Skill


1/18,1/23              Inequality: What are the Facts?

                                Inequality: Polarization


*              Inequality in America, chapter 1, p.1-20.


*              Autor, D. “The Polarization of Job Opportunities in the U.S. Labor Market,” The Hamilton Project, Center   for American Progress, April 2010.



1/25        Supply and Demand for Skill


*              Bound, J. and G. Johnson, “What are the Causes of Rising Wage Inequality in the U.S.?” Economic Policy Review, Federal Reserve Bank of New York, January 1995.


1/30                        Quiz 1  (NOTE: THIS QUIZ IS RESCHEDULED FOR 2/1)



1/30, 2/1                                Globalization and Computers


*              Wood, A.  “How Trade Hurt Unskilled Workers,” The Journal of Economic Perspectives, Summer 1995.



Krugman, Paul. “Trade and Inequality, Revisited,” Brookings Papers on Economic Activity, Spring 2008.  (complete article)


*      (short piece)


*              Autor, D., F. Levy, and R. Murnane, “Upstairs Downstairs: How Introducing Computer Technology Changed Skills and Pay on Two Floors of Cabot Bank,” Federal Reserve Bank of Boston Regional Review, 2002.



II. Economic Models of Education


2/6, 2/8                  Human Capital Investment Model


*              Borjas, chapter 6 (on E-reserve)


2/13                        Quiz 2


2/13                        Education as Signaling


                Borjas, chapter 6 (on E-reserve)


2/15, 2/20             Estimates of the Returns to Schooling


                Borjas, chapter 6 (on E-reserve)

*              Borjas, chapter 1 appendix on regression analysis  (on E-reserve)


III. Education Production and School Resources


2/22, 2/27School Resources – Overview


*              Ehrenberg, R.,  “Class Size and Student Achievement.” Psychological Science in the Public Interest, Vol.2, No.1, May 2001. (available through UH E-Journals—type in journal title in UH catalogue search)


2/27                        Quiz 3


2/29        School Resources – Alternative View


*              Card, D. and A. Krueger, “School Resources and Student Outcomes: An Overview of the Literature and New Evidence from North and South Carolina,” The Journal of Economic Perspectives, Fall 1996, Vol. 10, No.4.  (JSTOR)


3/5          New Evidence on Class-Size and Kindergarten


Chetty, Raj, et. al “How Does Your Kindergarten Classroom Affect Your Earnings? Evidence from
Project STAR,” Quarterly Journal of Economics, 2011.  (Full paper)

*      (Non-technical summary)



3/5,3/7   Peer Effects


Hoxby, C.  “Peer Effects in the Classroom: Learning from Gender and Race Variation,” National Bureau of Economic Research Working Paper No.7867, 2000.


*              Hoxby, C. “The Power of Peers,” Education Next, Summer 2002.  (non-technical summary)


*              Goethals, G., G. Winston, D. Zimmerman, “Students Educating Students: The Emerging Role of  Peer Effects in Higher Education,” Forum Futures 1999.


*              Kremer, M. and D Levy, “Peer Effects and Alcohol Use Among College Students,” Journal of Economic        Perspective, 2008.



3/7                          Midterm Exam


3/12,3/14              Spring Break


3/19,3/21Teacher Quality and Market for Teachers


*              Corcoran, S., W. Evans, R. Schwab, “Changing Labor-Market Opportunities for Women and the Quality of Teachers, 1957-2000,” American Economic Review, May 2004. (JSTOR)


*              Hoxby, C. and A Leigh, “Pulled Away or Pushed Out?  Explaining the Decline of Teacher Aptitude in the United States,” American Economic Review, May 2004. (JSTOR)


*              Angrist, J. and J. Guryan, “Teacher Testing, Teacher Education, and Teacher Characteristics,” American Economic Review, May 2004. (JSTOR)


3/26        New Evidence on Teachers


Chetty, Raj, et. al “The Long-term Impacts of Teachers: Teacher Value-Added and Student Outcomes in Adulthood,”
 2012. (Full paper)

*      (Non-technical summary)


3/28        Catholic Schools and Charter Schools– what is the key to success? 


*              Neal, Derek, “What Have We Learned about the Benefits of Private Schooling?”  Federal Reserve Bank of New York Economic Policy Review, March 1998.

(available on-line


*              Angrist, J. et. al “Inputs and Impacts in Charter Schools: KIPP Lynn.” American Economic Review, May 2010.       




4/2,4/4   School Accountability – the verdict on No Child Left Behind  (starred readings to TBA)


Staiger, D. and J. Rockoff, “Searching for Effective Teachers with Imperfect Information,” Journal of  Economic Perspectives, Summer 2010.


Neal, Derek “Aiming for Efficiency Rather than Proficiency,” Journal of Economic Perspectives, Summer 2010.


Hanushek, E. and S. Rivkin,”The Quality and Distribution of Teachers under the No Child Left Behind Act,” Journal of Economic Perspectives, Summer 2010.


Murnane, R., and J. Papay, “Teachers’ Views on No Child Left Behind: Support for the Principles, Concerns about the Practices,” Journal of Economic Perspectives, Summer 2010.


Lang, Kevin. “Measurement Matters: Perspectives on Education Policy from an Economist and School Board Member,” Journal of Economic Perspectives, Summer 2010.

4/4          Quiz 4

IV.  Human Capital Policy:  At What Age Should Government Intervene?


4/9          Headstart and Early Childhood Education


*              “Interview with James J. Heckman,” The Region , Federal Reserve Bank of Minneapolis, June 2005.


*              Currie, Janet, “Early Childhood Education Programs,” Journal of Economic Perspectives, Spring 2001 (JSTOR)        


*              Inequality in America, chapter 1, p.21-63, chapter 2, p.163-182.



4/11        GED: High School Equivalency Exam


*              Inequality in America, chapter 2, p.141-147.


*              Heckman, J. and Y. Rubinstein, “Importance of Non-cognitive Skills: Lessons from the GED Testing Program,” American Economic Review, May 2001 (JSTOR)


*              Boesel, D. et. al “Educational and Labor Market Performance of GED Recipients,” U.S. Department of Education,” January 1998.


4/11        Quiz 5


4/16        Higher Education:  Impact of Tuition Subsidies and Financial Aid                         


*              Dynarski, S. “Hope for Whom? Financial Aid for the Middle Class and Its Impact on College Attendance,” National Tax Journal, September 2000. (available through UH E-Journals—type in journal title in UH catalogue search)


*              Inequality in America, chapter 2, p.96-141.


4/18        Adult Training Programs


*              Inequality in America, chapter 2, p.182-194.


*              LaLonde, R. “The Promise of Public Sector-Sponsored Training Programs,” Journal of Economic Perspectives, Spring 1995. (JSTOR)


4/23, 4/25, 4/30   Presentations by Policy Recommendation Teams


                                Final Exam – Friday, May 4, 2-5 p.m.