How Responsive is Investment in Schooling to Changes in Redistribution Policies and in Returns

57 Pages Posted: 31 May 2011

See all articles by Ran Abramitzky

Ran Abramitzky

Stanford University - Department of Economics

Victor Lavy

University of Warwick - Department of Economics; Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: May 2011

Abstract

This paper uses an unusual pay reform to test the responsiveness of investment in schooling to changes in redistribution schemes that increase the rate of return to education. We exploit an episode where different Israeli kibbutzim shifted from equal sharing to productivity-based wages in different years and find that students in kibbutzim that reformed earlier invested more in education. This effect is stronger for males and is mainly driven by students whose parents have lower levels of education. Our findings support the prediction that education is highly responsive to changes in the redistribution policy, especially for students from weaker backgrounds.

Suggested Citation

Abramitzky, Ran and Lavy, Victor, How Responsive is Investment in Schooling to Changes in Redistribution Policies and in Returns (May 2011). NBER Working Paper No. w17093. Available at SSRN: https://ssrn.com/abstract=1854195

Ran Abramitzky (Contact Author)

Stanford University - Department of Economics ( email )

Stanford, CA 94305
United States

Victor Lavy

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel
+972 2 588 3245 (Phone)
+972 2 581 6071 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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