Evaluating institutional changes in education and wage policy

Författare: Martin Söderström, Och

Sammanfattning av Dissertation series 2006:3

SÖDERSTRÖM, Martin, 2006, Evaluating Institutional Changes in Education and Wage Policy; Department of Economics, Uppsala University, Economic Studies 95, 131 pp, ISBN 91-85519-02-2.
This thesis consists of four self-contained essays.
Essay I (written with Roope Uusitalo) studies the effects of school choice on segregation. We analyse the effect of a reform in Stockholm that changed the admission system of public upper secondary schools. Before the year 2000, students were assigned to their nearest school, but from the fall of 2000 and onwards, the students can apply to any school within Stockholm City and admission decisions are based on grades only. We show that the distribution of students over schools changed dramatically as a response to extending school choice. As expected, the new admission policy increased segregation by ability. However, segregation by family background, as well as, segregation between immigrants and natives also increased significantly. Furthermore, the results show that the increase in school segregation between immigrants and natives is not explained by differences in prior achievement.
Essay II studies the effects of school choice on student achievement by analysing a reform in the Stockholm municipality that changed the admission system of public upper secondary schools. Before 2000, students had priority to the school situated closest to where they lived, but from the fall of 2000 and onwards, admission is based on grades only. Since all schools became open for application from anyone, and funding follows the students, the reform imposed strong incentives for school competition. It is shown that the reform has contributed to increase the between school variance in student outcomes. More importantly, the results indicate that students in Stockholm perform no better with increased choice availability.
Essay III evaluates the introduction of individual wage bargaining for Swedish teachers. A highly centralized bargaining structure with wage scales was in 1996 replaced by a decentralized one, where teachers now negotiate their own wages. The scales induced an increasing age profile of wages and a decreasing age profile of wage dispersion. This paper investigates whether this system was a binding constraint, by studying the earnings structure of teachers during the 1990s. The results indicate reform effects, most pronounced for compulsory school teachers; both the age profile of earnings and earnings dispersion shifted, generating smaller differences over the age distribution. Furthermore, there are no indications that the returns to observable productive teacher characteristics such as education and certification increase after the reform, rather the opposite.
Essay IV (written with Peter Fredriksson) examines the relationship between unemployment benefits and unemployment using Swedish regional data. To estimate the effect of an increase in unemployment insurance (UI) on unemployment we exploit the fact the generosity of UI varies regionally because there is a ceiling on benefits. The actual generosity of UI varies within region over time due to, e.g., differences in expected regional wage growth and variations in the benefit ceiling. We find fairly robust evidence suggesting that the actual generosity of UI does matter for regional unemployment. Increases in the actual replacement rate contribute to higher unemployment as suggested by theory. We also show that removing the wage cap in UI benefit receipt would reduce the dispersion of regional unemployment. This result is due to the fact that low unemployment regions tend to be high wage regions where the benefit ceiling has a greater bite. Removing the benefit ceiling thus implies that the actual generosity of UI increases more in low unemployment regions.

SÖDERSTRÖM, Martin, 2006, Evaluating Institutional Changes in Education and Wage Policy; Department of Economics, Uppsala University, Economic Studies 95, 131 pp, ISBN 91-85519-02-2.This thesis consists of four self-contained essays.

Essay I (written with Roope Uusitalo) studies the effects of school choice on segregation. We analyse the effect of a reform in Stockholm that changed the admission system of public upper secondary schools. Before the year 2000, students were assigned to their nearest school, but from the fall of 2000 and onwards, the students can apply to any school within Stockholm City and admission decisions are based on grades only. We show that the distribution of students over schools changed dramatically as a response to extending school choice. As expected, the new admission policy increased segregation by ability. However, segregation by family background, as well as, segregation between immigrants and natives also increased significantly. Furthermore, the results show that the increase in school segregation between immigrants and natives is not explained by differences in prior achievement.

Essay II studies the effects of school choice on student achievement by analysing a reform in the Stockholm municipality that changed the admission system of public upper secondary schools. Before 2000, students had priority to the school situated closest to where they lived, but from the fall of 2000 and onwards, admission is based on grades only. Since all schools became open for application from anyone, and funding follows the students, the reform imposed strong incentives for school competition. It is shown that the reform has contributed to increase the between school variance in student outcomes. More importantly, the results indicate that students in Stockholm perform no better with increased choice availability.

Essay III evaluates the introduction of individual wage bargaining for Swedish teachers. A highly centralized bargaining structure with wage scales was in 1996 replaced by a decentralized one, where teachers now negotiate their own wages. The scales induced an increasing age profile of wages and a decreasing age profile of wage dispersion. This paper investigates whether this system was a binding constraint, by studying the earnings structure of teachers during the 1990s. The results indicate reform effects, most pronounced for compulsory school teachers; both the age profile of earnings and earnings dispersion shifted, generating smaller differences over the age distribution. Furthermore, there are no indications that the returns to observable productive teacher characteristics such as education and certification increase after the reform, rather the opposite.

Essay IV (written with Peter Fredriksson) examines the relationship between unemployment benefits and unemployment using Swedish regional data. To estimate the effect of an increase in unemployment insurance (UI) on unemployment we exploit the fact the generosity of UI varies regionally because there is a ceiling on benefits. The actual generosity of UI varies within region over time due to, e.g., differences in expected regional wage growth and variations in the benefit ceiling. We find fairly robust evidence suggesting that the actual generosity of UI does matter for regional unemployment. Increases in the actual replacement rate contribute to higher unemployment as suggested by theory. We also show that removing the wage cap in UI benefit receipt would reduce the dispersion of regional unemployment. This result is due to the fact that low unemployment regions tend to be high wage regions where the benefit ceiling has a greater bite. Removing the benefit ceiling thus implies that the actual generosity of UI increases more in low unemployment regions.