Introduction to Human Capital Theory Brief discussion of they following research papers “Estimates of the economic return to schooling from a new sample of twins” “Income, schooling, and ability: Evidence from a new sample of identical twins” “Language in the public service” “Education, earning, and the “Canadian G.I. Bill” “The performance of the 1990s Canadian labour market” “Post-secondary education in Canada: can ability bias explain the earnings gap between college and university graduates?”

1. Presented by:
Tom Seniuk
Jidong Xu
Neaz Mujeri

2. Agenda
 Introduction to Human Capital Theory
 Brief discussion of they following research papers
(Which one are we not doing?)
 “Estimates of the economic return to schooling from a new sample
of twins”
 “Income, schooling, and ability: Evidence from a new sample of
identical twins”
 “Language in the public service”
 “Education, earning, and the “Canadian G.I. Bill”
 “The performance of the 1990s Canadian labour market”
 “Post-secondary education in Canada: can ability bias explain the
earnings gap between college and university graduates?”

3. EVIDENCE FROM A NEW SAMPLE OF IDENTICAL
TWINS
ORLEY ASHENFELTER AND CECILIA ROUSE

4. GOAL
The goal is to estimate the return to schooling for
genetically identical individuals, the correlation of
ability with schooling levels, and the extent to which
the return to schooling varies with ability level.

10. CONCLUSION
 The average return to schooling is about 9 percent per
year attained for genetically identical individuals.
 The returns to schooling may be slightly lower for high
ability individuals, so that schooling compensates for
genetic differences.

11. CONCLUSION(continuing)
 Typical cross-section estimates of the return to
schooling are slightly upward biased.
 High ability individuals invest more in schooling
because they face lower marginal costs of doing so.
 These results stand in sharp contrast to recent claims
that genetic factors predetermine education and
income.

12. “The performance of the 1990s
Canadian labour market”
Authored by Garnett Picot and Andrew Heisz
Introduction
- The economy of the 90’s
- Labour demand in the 90’s

13. 90’s labour markets

14. Continued
Why would the 90’s labour market have deviated from the
80’s?
- Structural changes in labour demand
- Weak aggregate labour demand
- Change in firm management of their workforces
- Supply side changes
- Institutional changes

15. Summary of the 90’s
Summary of the 90’s outcomes;
- Lack of employment creation
- Types of jobs created
- Increased downsizing
- Job stability
- human capital imbedded in the labour force
- Productivity growth

16. Human Capital
The Decline in labour market outcomes for workers with a
given level of human capital
- supply side shift in the quality of workers
- The number of total degree holders

17. Labour force by education

18. Conclusion
Has the unemployment rate increased for workers with a
particular level of experience and education?
- The performance of the labour market for men
- The performance of the labour market for women
- Summary

19. “Post-secondary education in Canada:
can ability bias explain the earnings gap
between college and university graduates?”
Authored by Vincenzo Caponi and Miana Plesca
Introduction
- Canada and post secondary education choices
- Differences in returns to human capital (university
and non-university choices

20. Sample data
A word about the sample data used in the paper
- General Social Survey (GSS)
- Addressing selection bias and ability
- Defining educational attainment

21. Educational Attainment statistics

22. Earnings statistics

23. Estimation Methodologies
The model
- Standard wage equation framework
- Y = βX + δD + ε
- correcting for selection bias
-Propensity score matching
- Heckman correction

24. Returns to Education

25. Conclusions
- Positive ability selection
- Once corrected, returns are lower than OLS prediction
- University and college returns vs. high school
- Gap between trades/college and university
- Ability selection can account for some of the earnings gap
- Are large gap still remains
- IRR
- Canada and the college/trade choice – a puzzle

26. Language in the Public Service
Authored by
Louis N. Christofides &
Robert Swidinsky

27. In the Canadian public sector, legislation regulates the language of work
and service to the public, generating a demand for bilingualism. The
paper examines whether the bilingualism premium is higher in the
public than in the private sector. It also analyses how earnings from three
census years, one before the legislation was strengthened, and the rest
after the legislation, shows the evolution of the earnings in both public
and private sectors.
Abstract

28. Background
 In Canada, official bilingualism has been implemented
through the 1969 Official Languages Act (OLA) which
was substantially revised and strengthened in 1988.
 The proportion of bilingual employees in the public
sector is much higher than that in the private sector.
 For most Canadians, the acquisition of a second
language is costly and the willingness to incur this cost
depends on the earnings benefit to be obtained.

29. Background (Continued)
 In Canada, different bilingualism premium exists in
different regions because of costly mobility and
consequent local demand/supply conditions.
 The bilingual differentials may have a sectoral
dimension if certain sectors are concentrated in local
labour markets. For example, the concentration of the
public sector in the Ottawa-Hull area.

30. Public vs. Private:
 The empirical issue at hand here is to determine the
reward to the greater human capital embodied in
bilingualism.
 Bilinguals in the public sector may earn more than
bilinguals in the private sector not because of a higher
bilingualism premium in their sector but because of the
general public sector advantage.
 Key assumption: the public sector advantage is common to
all employees of the public sector regardless of linguistic
proficiency.

31. Public vs. Private:
 Public sector bilinguals may be better educated than
private sector bilinguals and the public-private sector
bilingual earnings premium may simply reflect
superior human capital.
 The study focuses on the pattern of earnings in the
public and private sectors of Canada by bilingualism
status. It considers how the relative earnings of these
public and private sector bilinguals and unilinguals
have changed over time.

32. Findings:
 The findings confirm a general earnings advantage in the
public over the private sector and for bilinguals over
unilinguals.
 The bilingualism premium is higher in the public sector
and persists even after observable characteristics are taken
into account.
 The demand for bilingualism increased after the revisions
to the OLA. This increased premium declined over time
due to increase in the availability of school programs
offering French to anglophones and the increase in
francophones to learn and work in English.

33. Findings:
 In summary, the mean earnings for both men and
women indicate a bilingual premium in the public
sector which has been higher than the one prevailing
in the private sector.
 Because the public sector is concentrated in the
Ottawa-Hull area, it is possible that the return to
human capital embodied in bilingualism is affected by
local demand/supply conditions and may differ from
that prevailing in the private sector.

35. Limitations:
 The census data contain some exogenous variables that
are not normally included in the matrix to calculate
bilingual premium above but might influence sector
selection and linguistic attainment (e.g. place of birth
and mother tongue).

36. What Happens Next?
 Secular increases in the supply of bilingual skills, achieved
through the enhanced offering of core French and French
Immersion programs to anglophones and a greater
tendency by francophones to learn English, may be
important forces in the labour market in the future.
 Analysis of a more recent period would be desirable
because it might indicate whether the stronger tendency
for students to become bilingual has depressed further the
public sector bilingualism premium.