Wages, School Quality, and Employment Demand

David Card and Alan B. Krueger have made substantial contributions to the field of Labor Economics. Their influential work focuses on policy-relevant issues and spans vast and important topics, including: unemployment, minimum wage, migration, measurement error, unions, wage differentials among various groups in the US, labor demand, social insurance, and technological change. Card and Krueger have also been extremely influential in econometrics methodology; they were at the forefront of employing an 'experimental' approach in their research design and implementation. Both of these IZA prize winners have made significant methodological contributions on instrumental variable estimation, measurement error, regression discontinuity methods, and the use of 'natural' experiments. This book provides an overview of their most important work and is divided two main parts: the first section focuses on school quality and the differences in wages across groups in the US; the second part concentrates on the effect of changes in the minimum wage on employment and wage setting. In section introductions, Card and Krueger offer their insight into these two areas and discuss the historical context for their research.

Introduction by the Editors: Ingenuity and Creativity	p. 1
School Quality, Earnings, and Black-White Wage Differences
Introduction	p. 7
Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States	p. 12
An Empirical Framework for Modeling Returns to Schooling	p. 14
Functional Form	p. 16
Measures of the Quality of Public Schooling	p. 20
Returns to Education by Cohort and State of Birth for White Men	p. 24
Rates of Return to Education by State and Cohort	p. 24
Rates of Return and the Quality of Schools	p. 29
Other Characteristics of Schools and States	p. 33
Adjustments for Mobility of Preschool and School-Age Children	p. 39
Log-Linear Specification	p. 40
The Effects of School Quality on Education and Earnings	p. 41
Location and Shape of the Earnings-Education Relationship	p. 41
Reduced-Form Estimates	p. 45
Conclusions	p. 47
	p. 49
	p. 51
School Quality and Black-White Relative Earnings: A Direct Assessment	p. 53
The Evolution of Black-White Earnings:1960-1980	p. 55
The Importance of Southern-Born Workers for the Black-White Wage Gap	p. 60
Two Kinds of Schools	p. 67
Interstate Differences in Relative Black-White School Quality	p. 70
School Quality and the Return to Education	p. 73
The Returns to Education by Race	p. 75
Estimation Results	p. 79
The Effect of School Quality Before the Civil Rights Act	p. 84
Additional Aspects of School Quality	p. 85
School Quality and the Black-White Wage Gap: Reduced-Form Estimates	p. 88
Conclusions	p. 94
	p. 95
	p. 97
	p. 99
School Resources and Student Outcomes: An Overview of the Literature and New Evidence from North and South Carolina	p. 101
Theoretical Framework	p. 104
Empirical Findings	p. 107
A Comparison of North and South Carolina	p. 114
Conclusions	p. 119 Appendix
Experimental Estimates of Education Production Functions	p. 122
Background on Project STAR and Data	p. 125
Design and Implementation	p. 125
Data and Standardized Tests	p. 131
Statistical Models	p. 134
Effects of Attrition	p. 137
Two-Stage Least Squares (2SLS) Models	p. 142
Models with Pooled Data	p. 144
Heterogeneous Treatment Effects	p. 148
Hawthorne and John Henry Effects	p. 150
Separate Subject Test Results for SAT and BSF	p. 151
Conclusions	p. 152
	p. 155
Minimum Wages and Employment Demand
Introduction	p. 156
Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage	p. 160
Minimum Wage Statutes in 1989-1990	p. 161
The Effect on Teenagers: An Overview	p. 162
A Grouped Analysis	p. 168
An Analysis by State	p. 172
Conclusions	p. 179
Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania	p. 181
The New Jersey Law	p. 183
Sample Design and Evaluation	p. 183
Employment Effects of the Minimum-Wage Increase	p. 189
Differences in Differences	p. 189
Regression-Adjusted Models	p. 191
Specification Tests	p. 194
Full-Time and Part-Time Substitution	p. 197
Other Employment-Related Measures	p. 199
Nonwage Offsets	p. 200
Price Effects of the Minimum-Wage Increase	p. 201
Store Openings	p. 203
Broader Evidence on Employment Changes in New Jersey	p. 205
Interpretation	p. 206
Standard Competitive Model	p. 206
Alternative Models	p. 207
Conclusions	p. 208
A Re-Analysis of the Effect of the New Jersey Minimum Wage with Representative Payroll Data	p. 210
Analysis of Representative BLS Fast-Food Restaurant Sample	p. 213
Description of BLS ES-202 Data	p. 213
Summary Statistics and Differences-in-Differences	p. 215
Regression-Adjusted Models	p. 218
Specification Tests	p. 220
Repeated Cross Sections from the BLSES-202 Data	p. 223
The Effect of the 1996 Federal Minimum-Wage Increase	p. 225
A Re-analysis of the Berman-Neumark Wascher (BNW) Data Set	p. 226
Genesis of the BNW Sample	p. 226
Basic Results	p. 228
Regression-Adjusted Models	p. 229
Alternative Specifications and Samples	p. 232
Consistency of the BNW Sample with the Card-Krueger and BLS Samples	p. 235
Patterns of Employment Changes Within New Jersey	p. 240
Other Evidence for the Eating and Drinking Industry	p. 242
Conclusions	p. 245
Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts	p. 247
Employment and Wages in a Simple Contract Model	p. 249
Interpreting the Correlation of Employment and Wages	p. 249
Specification of the Employment Demand Function	p. 252
Allowing for the Presence of Efficient Contracting	p. 253
Data Description and Measurement Framework	p. 254
The Effect of Previous Wage Rates on Subsequent Wage Determination	p. 260
The Determinants of Contractual Employment	p. 263
Conclusions	p. 269
	p. 270
Concluding Thoughts	p. 274
Notes	p. 276
References	p. 292
Index	p. 302
About the Authors and the Editors	p. 308
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Wages, School Quality, and Employment Demand

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