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Abstract:
We use cohort data from 11 European countries to study whether experience profiles differ by educational attainment. Previous literature does not provide a clear answer to this question, that is important to evaluate private returns to education over the working life of individuals. We find evidence that employees with tertiary education have steeper experience profiles than employees with upper secondary or compulsory education. Hence, education provides not only an initial labour market advantage but also a permanent advantage that increases with time in the labour market. We also find that differences in earnings growth by education are lower in countries with a higher level of corporatism and higher in countries which have experienced both relatively fast labour productivity growth and a relatively low educational attainment. The educational system also seems to matter, because countries with a more stratified system of secondary education have smaller differences in earnings growth by education.

Education, earnings growth, Europe

Abstract:
The purpose of this paper is to provide an update of the empirical evidence on the private returns to education in Italy. First, we show that, whilst returns to education in Italy (based on gross wages) are in line with the European average, educational attainment is generally much lower (particularly at secondary and tertiary levels). How can we reconcile these findings? Based on a simple human capital model - where the optimal level of schooling is given by equating the marginal return to the marginal cost of education ? we speculate that
either marginal costs are steeper in Italy or that a larger share of the population involved in human capital investment faces high marginal costs in Italy compared to the European
average.

Second, we examine whether the estimated returns to education have varied significantly over time. The evidence is that returns have not changed much over the period 1977 to 1995, with the exception of 1993 and 1995, when they have increased significantly, especially among female employees. Quite interestingly, the observed increase in the returns to education has been almost completely driven by higher returns to education in the public sector. Assuming that skill biased technical change has been an important factor in shifting out the marginal returns to education, an important question for future research is why these shifts have only affected returns in the public sector of the economy.

Third and last, we confirm the usual finding in the international literature that accounting for measurement error in years of schooling and/or for the endogeneity of educational choices by using instrumental variables significantly increases the returns to education with respect to estimates based on OLS methods. We also show that adding family background variables
to the set of instruments significantly increases returns, which suggests that these variables affect mainly the subgroup of individuals with higher marginal returns to schooling.

Abstract:
We study the recent evolution of the college wage gap with a unique data set that covers 10 European countries and two cohorts of male employees from the early to mid 1980s to the mid to late 1990s. We find evidence of significant cross country differences in the level and dynamics of the gap. There is also evidence that both the level and the growth of the college wage gap significantly differ between cohorts. The estimated growth in the gap turns out to be negatively correlated to changes in relative supply and positively correlated both with the long run rate of productivity growth and with an index of between industry demand shocks. Institutional changes also matter, and we find that countries that have experienced declines in union density, in the centralization of the wage bargain and in employment protection measures have also had a faster growth in the college wage gap.

College wage gap, growth of college wage gap, labour market institutions, Europe

Abstract:
According to the standard principal-agent model, the optimal composition of pay should balance the provision of incentives with the individual demand for insurance. Do income taxes alter this balance? We show that the relative share of PRP on total pay is reduced by higher average taxes, and is affected in a complex way by higher marginal tax rates. Empirical evidence based on the British Household Panel Survey, which exploits the UK 1999 Tax Reform, supports the theoretical predictions of the tax-augmented principal-agent model.

performance related pay, income taxes