Ciudadanía y Entorno Escolar

Estimation

I estimate the regional price series for four different human capital types defined by edu-

cation categories: college graduates, some college, high school graduates, and high school dropouts. I use theflat spot approach to estimate these prices and use the methodology in Bowlus and Robinson (2012) to select the flat spots for each region. This suggests using the flat spot ages 50-59 for college graduates, 48-57 for those with some college educa- tion, 46-55 for high school graduates, and 44-53 for high school dropouts for all regions. The methodology used for estimating prices requires working with wages of older workers which leaves very small sample sizes at local levelsfiner than Census regions, i.e. state or MSA level. Thus, local markets are defined by Census regions rather than states or MSAs. Equation (3.7) suggests constructing price series from mean log wage differences for

those who are in theflat spot age range. I use medians instead of means to avoid problems due to time varying top-coding of income and allocated values in earnings. Since the data used are repeated cross-sections, I do not observe the same individuals for two years in a

row, but I can follow cohorts from one year to the next. I compute age-specific median wages for each education group and year. Then, within an education category, for example for the college graduates, I compute the average of log median wages for 50-58 year old workers in year t₋ 1 and the average for 51-59 year old workers in year t, and take the difference of the two for eacht. The price in yeartis then estimated as the cumulative sum

of these differences up to yeartrelative to a baseline year.

Estimated Series

Figure 3.4 plots the estimated price series for each Census region and the U.S. for 1963- 2008.17 _{National prices (inferred from looking at the entire country) for all education}

groups are increasing during the 1960s and 1970s and follow a downward trend after the 1970s. College prices in the Northeast and Midwest follow the national trend very closely, whereas college prices in the South and West regions do not. During the 1960s and 1970s, the college price increased faster in the South compared to other regions, and it was more or less stable from then on. In the West, the college price saw a sharper decline during the 1990s compared to other regions before it recovered in the 2000s.

The overall patterns for high school prices are very similar across regions. The only exception is the West region during the late 1980s, where the high school price saw a much sharper decline compared to other regions. Similarly, for high school dropout and some college prices, the overall patterns look similar across the regions with some exceptions: During the late 1980s, the dropout price saw the largest decline in the Midwest, while it was more or less stable in the other regions during that time. The price for some college saw a larger decline in the Midwest during the late 1980s and after compared to other regions, which followed the national trend closely.

17_{The prices are normalized to one in 1974 and 1975 for each education group in all regions as explained}

Figure 3.4: Price Series By Education Group and Region: 1963-2008

(a)

Figure 3.4: continued

(c)

Figure 3.5 shows that relative price movements differ significantly across regions, while

Figure 3.1 shows more similar patterns for college-high school relative wages across re- gions. Therefore, the composition-adjusted college wage premium masks important trend differences in skill prices, and therefore in skill quantities, over time across the regions.18

Relative prices decreased between the 1960s and 1980s in the Midwest, and decreased be- tween the 1960s and 1990s in the Northeast. This implies that the increases in college wage premia during these periods in these regions were mostly due to increases in the relative quality of college and high school labour. This can be seen in Figure 3.6, which shows the log ratio of college-high school average skill quantities.19 _{Relative prices in the South}

are more or less stable since the 1990s while college wage premium increased steadily in this region. Figure 3.6 shows that increases in college wage premium in the South since

Figure 3.5: Log Ratio of College-High School Prices: 1963-2008

18_{Carneiro and Lee (2011) alsofinds evidence for differences in wage and price movements.}

19_{Log ratio of average skill quantities are calculated as differences between log average wage ratios and}

the 1990s were mostly driven by increases in college-high school average skill quantity ratios. In contrast, increases in college wage premia in the West seem to be driven mostly by increases in relative prices, especially in the 1980s. Southern relative prices increase at a faster rate during the 1970s compared to other regions, which shows decreasing ratios for average skill quantities over this period.20 _{This is also true for the West, which exhibits de-}

creasing relative skill quantities during the 1970s. These decreases in average relative skill quantities are mainly driven by increases in average skill levels of high school graduates during this period.