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SUMMARY: Returns to Education with Earnings Uncertainty and Employment Ris
 k over the Life Cycle - Kai Liu (Faculty of Economics)
DTSTART:20231012T120000Z
DTEND:20231012T130000Z
UID:TALK202354@talks.cam.ac.uk
CONTACT:Cerf Admin
DESCRIPTION:The trade-off between risk and return plays a central role in 
 empirical work on investment in physical capital. In contrast\, this trade
 -off has received little attention in the empirical literature on investme
 nt in human capital. To date\, there is little causal evidence on how educ
 ation affects life-cycle earnings profiles\, earnings uncertainty\, and un
 employment risk. Yet theory suggests these factors could be important both
  to accurately measure the returns to education\, to explain the decision 
 to invest or not in education\, and to understand the observed earnings dy
 namics and inequality over the life-cycle.\n\nThe primary contribution of 
 our paper is to incorporate earnings uncertainty and employment risk in th
 e empirical measurement of the returns to education. To do so\, we first c
 haracterize the causal relationship between schooling and earnings over th
 e life-cycle\, following the same individuals across their working lifespa
 n. This relationship allows us to draw conclusions about how additional sc
 hooling affects the level and dispersion of earnings over the life cycle. 
 To try to disentangle uncertainty from heterogeneity\, we next model the u
 nderlying earnings process\, targeting the estimated causal relationship b
 etween schooling and earnings over the life-cycle. We then fit a life-cycl
 e model with precautionary saving motive to the estimated earnings process
  and observed consumption profiles. The estimated model allows us to quant
 ify how earnings uncertainty and employment risk affect the incentives to 
 invest in education\, and to examine the extent to which the progressive t
 ax-transfer system distorts these incentives.\n
LOCATION:CJBS\, Castle Teaching Room
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