EMPIRICAL ESSAYS IN EDUCATION AND LABOR ECONOMICS

This thesis is composed of three distinct chapters. The first two contribute to the economics of higher education literature, while the third estimates a structural model of household behavior. Chapter 1 presents a study assessing the impact of grading standards (GS) in Italian departments on the labor market outcomes of university graduates. The influence of heterogeneous GS on labor market performance can occur through two different channels: a productivity and a signaling effect. The empirical papers trying to answer the same research question are quite rare due to limitations in data availability. This study provides first evidence on the dynamic effects of GS on university graduates in Italy, evaluating the impact on wages, employment and overeducation. The analysis is performed using unique data provided by Almalaurea on graduates in years 2008 and 2009 matched with department-level information on research quality and resources. Italy is an interesting case study since university graduation rates are low but, at the same time, returns to higher education are below the average of other developed countries. The human capital accumulated is also quite low. The PIAAC data, measuring the level of skills in OECD countries by level of education, place Italian university graduates at the bottom of the ranking. For these reasons it is important to find policies that can increase the average productivity of highly educated workers. Furthermore, in the last decades the increased supply in the market for higher education and the 3+2 reform lead to a larger heterogeneity in quality and in GS between institutions. The estimation strategy is divided in two steps. Firstly, we estimate a proxy for GS as the part of final grades which cannot be explained by differences in individual characteristics (student's quality) and other relevant inputs (quality of the institution attended). Then, the effect of GS on wage and other labor market outcomes is estimated. We show that differences in GS are large across departments. More generous grades are associated to a wage penalty on the labor market 5 years after graduation. In particular, graduates from 'generous' departments earn 3.4% less than people who studied in the 'strict' departments, they have a lower employment rate and a higher probability of being too educated for their jobs. The effects on wages are stronger for high ability workers while employment is more affected for low ability and female graduates. Chapter 2 assesses the impact of the first Italian Research Evaluation Exercise (REE) on students' enrollment choices. All Italian REEs have been followed by lively debates. Critics of REE maintain that they are very expensive and excessively based on quantitative (e.g., bibliometric) indicators. Advocates of REEs rebut that in a period of shrinking public funding of Higher Education it is more important than ever to allocate resources in an effective and efficient way. However, there is no evidence on the effect of the REE on students' choices. Our paper is related to the literature which, especially in the US, has investigated the effects on student application and matriculation decisions of ratings and rankings of Higher Education Institutions (HEIs) produced by private `intermediaries'. We provide a first assessment of the impact of the 'Valutazione Triennale della Ricerca' (VTR) on student choices using a before-after estimator which exploits differential treatment intensities across HEIs. In particular, we investigate whether departments that received a better score also beneted of more student enrolments and enrolments of students with better entry qualications after the VTR. This identication strategy enables us to control for both department-specific time invariant unobservable heterogeneity and pre-existing department trends. The analysis is performed using data on enrollment at the department level between 2002 and 2011 merged with data on research quality of departments from the first REE accomplished in Italy (the VTR). Italy is an interesting case study since enrollment has been decreasing in Italy in the last decade, especially in the South, so assessing the effect of research quality on the quantity and quality of enrolled students is important. Our analysis demonstrates that increasing the percentage of excellent products by one standard deviation at the department level increases student enrollments by 6.5 percent. Effects are larger for high quality students, namely those with better high school final marks (10 percent) or coming from the academic track (11.8 percent). Departments in the top quartile of the quality distribution gained more from a good performance in the evaluation exercise. Effect magnitudes appear to be similar across all macro-regions (North, Centre and South and Islands), but are precisely estimated only for universities in Northern Italy. Finally, Chapter 3 presents and estimates a model of household behavior with endogenous labor supply and fertility choices. The estimated model is then used to assess the effect of a childbirth transfer on household decisions. We contribute to the recent literature (Adda et al., 2015) performing ex-ante structural evaluations of policies having the objective to modify the fertility and labor supply behavior of households. The model is estimated using the Italian Survey on Household Income and Wealth (SHIW) for the period 1984-2014, a dataset collected by the Bank of Italy every two years. The model parameters are estimated through the Method of Simulated Moments. We obtain moments from households in the 1960 cohort, i.e. people born in years 1957-1963. Structural estimation offer some important advantages with respect to reduced form approaches. First, it allows to model different sources of endogeneity (ex. self-selection into labor market participation). Second, it provides parameters from a theoretical model that can be used to simulate the effects of policy experiments. The model is able to explain quite well the behavior of men and women in the cohort. Preliminary results show that the permanent childbirth transfer is successful in increasing the total fertility rate of married women, even if it has a negative effect on employment.