Essays on the Economics of Human Capital

In the first paper we use a natural experiment that relaxed class attendance requirements for one school year to explore students’ marginal propensity to skip class, and to examine the effects of their absences on scholastic outcomes. We exploit exogenous variation resulting from a one-time policy Greece implemented allowing high school students to miss 30 percent more class hours without penalty during the 2009-10 academic year, a period when officials feared outbreaks of swine flu. Using a new dataset, we analyze which students missed more classes, and the effect of these absences on scholastic outcomes across the distribution of student ability, income, and peer quality. We find that while the swine flu itself did not affect the student population, the relaxed class attendance policy caused an increase in absences of roughly 10 hours per student, with more absences taken by those who had higher academic performance records, have academically weaker peers in their classes, or who live in poorer neighborhoods. End-of-year exam results show a positive effect of absences on grades across the ability distribution. The magnitude of the positive effect of absences on grades increases as we move to right of the ability distribution. Our results suggest that students who may have the resources or the human capital accumulation to learn outside the classroom may have lower performance when a strict attendance policy forces them to stay in class. In the second chapter we study the effect of disclosing relative performance information (feed- back) on students’ performance in high-school, on subsequent university enrollment, and on ex- pected subsequent earnings. We exploit a large-scale natural experiment in which students in some cohorts receive information about their relative performance within their schools and across the nation. Using unique primary data, we find an asymmetric response to feedback: high-achieving students improve their final-year performance by 0.15 of a standard deviation, whereas the final- year performance of low-achieving students drops by 0.3 of a standard deviation. The results are more pronounced for females, indicating greater sensitivity to feedback. We also document the long-term effects of feedback: high-achieving students reduce their repetition rate for the national exams; they enroll into university departments that are more selective by 0.15 of a standard de- viation and their expected annual earnings increase by 0.17 of a standard deviation. By contrast, the results for low-achieving students are negative. We provide suggestive evidence that feed- back encourages students from low-income neighborhoods to enroll in university and to study in higher-quality programs, which may, in the long run, reduce income inequality. In the third chapter we examine the extent to which college decisions among adolescents de- pend on the decisions of their peers. In particular, we ask whether individuals derive utility from conformity in college enrollment and academic mobility. We propose a new methodology in mit- igating reflection and endogeneity issues in identifying social interactions. We use the proportion of females in a student’s last year’s reference group (school and neighborhood) as an instrumental variable. We investigate utility spillovers from the educational choices of students in consecutive cohorts. Spatial variation allows us to identify social interactions in groups of various sizes. We use a new data set that spans the universe of high school graduates. We find positive and sig- nificant externalities in the decision to enroll in college and the decision to migrate to a different city among peers that belong to the same social group. Results indicate that students who are in a school or neighborhood with 100% more peers who enrolled in college last year are 29% or 9.6% more likely to themselves attend college. In the fourth chapter we consider how economic recessions alter the costs and expected returns of attaining college education in general and pursuing a specific college major. We examine how changes in the unemployment rate affect demand for college education, demand for different fields of university study and degrees’ admission thresholds. We use panel data for applications sub- mitted to the universe of undergraduate programs in Greece that span seven rounds of admission cohorts combined with a degree-specific job insecurity index, and time series on youth (ages 18- 25) unemployment. We find that degree- and major-specific job insecurity turns applicants away from degrees and majors that are associated with poor employment prospects. Results indicate that the steep increase in the unemployment rate that started in 2009 is associated with an increase in the number of college applicants. The effect is heterogeneous across fields, with an increase in the demand for degrees in Psychology as well as for entrance to Naval, Police and Military Academies, and a decrease in the demand for degrees in Business and Management. We also find that the business cycle changes degrees’ admission thresholds by affecting their popularity.Doctor of Philosoph