Human capital investments in a life-cycle perspective and across generations
Economic and Social History
Final Report Abstract
The main intention of this project is to analyse the effects of investments in human capital in a life-cycle perspective and in the light of the interaction of different kinds of interventions. We use information on large-scale historical reforms affecting the total amount of time spent in education and reforming postnatal care in Sweden during the 20th century in order to investigate the effects of human capital investments in the very long-run and across interventions. Our comprehensive historical database – which allows us to observe individuals at different points of the life-cycle – in combination with state-of-the-art econometric tools, enables us to estimate causal effects. Results of this project show that early investments in human capital can have persistent effects on various outcomes later in life. Furthermore, the results complement each other very well and shed further light on potential mediators which is a central challenge in longitudinal studies. Our first study shows that free and very basic infant care had large impacts on several school and labour market outcomes for the affected individuals. The results suggest that the intervention is associated with higher test scores in primary school for boys and girls. However, the gains are distributed differently across genders, with only girls being more likely to score in the top quintile. The subsequent gains – in secondary schooling, employment, and earnings – are restricted to women only. The differential gains for women relative to men likely accrued from both skills and opportunities, and the expansion of the welfare state having created unprecedented employment opportunities for women. Also, intervention effects are highly correlated across outcomes, implying that it is largely the same individuals who drive the various effects and who benefited from the intervention. Regarding the second study on compulsory schooling and term length policies, results indicate that investments earlier in life are more effective than later investments. This is in line with the theory of human capital production as presented for example in Cunha and Heckman (2007). Furthermore, our analysis delivers two important results: (i) extending the average term length from 34.5/36.5 to 39 weeks had sizeable effects on earnings and female employment whereas (ii) the compulsory schooling reform which increased primary education from 6 to 7 years was largely ineffective regarding later-life returns. The results are in line with the recent literature arguing that there are only minor or zero returns to an extra year of education at the end of compulsory schooling. However, the study also provides a positive story as to why such reforms fail to deliver positive results: far from being “untreatable”, the compliers to such reforms can benefit from investments undertaken earlier. Our project on investments in human capital is of contemporary relevance. The COVID-19 pandemic has shown that school closures have been a widely used political measure to reduce physical contacts. Although school closures might be beneficial for population health in the short run, there can be negative consequences for affected children in the long run as these closures reduce instructional time and therefore human capital accumulation. Thus, further research is needed as studies on the long run consequences for different areas of life are still scarce.
Publications
- (2020). The long-term effects of long terms– Compulsory schooling reforms in Sweden. Journal of the European Economic Association, 18(6), 2776-2823
Fischer, M., Karlsson, M., Nilsson, T., & Schwarz, N.
(See online at https://doi.org/10.1093/jeea/jvz071) - (2021). Does prolonged education causally affect dementia risk when adult socioeconomic status is not altered? A Swedish natural experiment in 1.3 million individuals. American Journal of Epidemiology, 190(5), 817-826
Seblova, D., Fischer, M., Fors, S., Johnell, K., Karlsson, M., Nilsson, T., et al.
(See online at https://doi.org/10.1093/aje/kwaa255) - (2021). Education and health: long-run effects of peers, tracking and years. Economic Policy, 36(105), 3-49
Fischer, M., Gerdtham, U. G., Heckley, G., Karlsson, M., Kjellsson, G., & Nilsson, T.
(See online at https://doi.org/10.1093/epolic/eiaa027) - (2021). Infant health, cognitive performance and earnings: Evidence from inception of the welfare state in Sweden. The Review of Economics and Statistics, 1-46
Bhalotra, S., Karlsson, M., Nilsson, T., & Schwarz, N.
(See online at https://doi.org/10.1162/rest_a_01031) - (2021). Revisiting Sweden's comprehensive school reform: Effects on education and earnings. Journal of Applied Econometrics
Fischer, M., Heckley, G., Karlsson, M., & Nilsson, T.
(See online at https://doi.org/10.1002/jae.2881)
