Summary of Home ownership, job duration, and wages

In this paper, the authors first hypothesized that employed home owners, compared to renters, are less likely to be unemployed, have longer employment spell lengths, and earn higher wages. Then the authors tested the hypotheses empirically based on a rich Danish micro data set. The data set they used covered one percent of the Danish population from years 1993 to 2001 and contained detailed information of housing, labor market experiences and demographic characteristics.   The pattern of the data showed that on average homeowners have more favorable labor market outcomes than renters.

To investigate the impact of home ownership on job duration and wages, the authors specified a competing risks duration model for job spells, used a mixed proportional hazard model for the labor market transitions to capture unobservable work characteristics, and estimated a standard human capital wage equation.

To identify the causal linkage between homeownership and hypothesis, the authors modelled the selection process into homeownership and used two different identification strategies to check the robustness of their results. The first identification related to the fact that some people change their home ownership status during job spells. This identification required authors to observe job spells both when the individual is a home owner and when he is a renter. Conditional on heterogeneity, it helped authors to see the relation between employment outcomes and home ownership status. The second identification was about exclusion restrictions, which helped tease out variables that affect home ownership decision but have no direct impact on labor market outcomes. The authors considered regional home ownership rate, home owner status of the parents, and home ownership rate in the region of birth as variables that only affected home ownership status. The whole model endogenized home ownership status.

The results of the paper were conform to the hypotheses. Home owners are less likely to transit into new jobs, and they earn higher wages. The paper suggests that there are labor market gains for homeownership. The problem of the model is that to make it more tractable, the authors restricted the correlation structure.  

Summary of Tenure Choice and Labor Market Outcomes

This paper tested at the individual level the argument that regional homeownership rates are positively correlated with regional unemployment rates.

The null hypotheses were based on search theory which argued that renters have a higher matching rates to firms while home owners, due to fixed cost in property acquisition and immobility, suffer more from regional demand shocks. Specifically, the hypotheses contends that renters, compared to homeowners, have lower unemployment probabilities, shorter duration of unemployment and higher wages.

Some previous research papers showed that at aggregate level house ownership has a negative impact on labor market outcomes. However, these papers failed to present evidence at individual level. Besides, much of the current evidence is bivariate, which means there may be omitted variables involved. To test hypotheses at individual level, Coulson and Fisher used two data sets, namely the March 2000 wave of Current Population Survey (CPS) and 1993 wave of the Panel Survey of Income Dynamics (PSID), with a multivariate model.

The CPS data included information on 29753 individuals’ housing, labor market experiences and demographic characteristics. The sample reflected the relatively wealthier portion of the country. Coulson and Fisher first used probit model, in which the dependent variable is a dummy variable, to test the hypothesis that homeowners are more likely to be unemployed. The univariate test turned out to reject the hypothesis. To tease out the impact of omitted variables, Coulson and Fisher then added some other significant variables such as age, races, education levels, marital status, and locations, but refined regression still rejected the hypothesis.

Coulson and Fisher then used CPS data and OLS method to test the hypothesis that renters have more wages. Both the unconditional and conditional tests showed that home owners have more wages than renters, which rejected the hypothesis.  

Having rejected the first and third hypothesis using CPS data, Coulson and Fisher used PSID to test the three hypotheses, particularly the second that renters have shorter duration of unemployment. Compared to CPS, which only included a simple cross-section, PSID had longitudinal data, which could be better used to test spell length of the sample. The sample consisted of 5125 individuals, which had on average lower incomes, lower education levels and younger ages compared to those in the CPS data. The univariate and multivariate regression tests both showed that home ownership is a significant negative indicator for unemployment and home owners earn more than renters. Assuming that the length of spells satisfies Weibull distribution, Coulson and Fisher ran the regression and found that home ownership exerts a negative influence on the length of the unemployment. The second hypothesis was rejected.

Coulson and Fisher rejected the null hypotheses that homeowners have lower unemployment probabilities, longer unemployment spells and lower wages than renters. The possible reasons why the hypotheses didn’t hold may be that mobility of renters tend to equalize unemployment rates across areas regardless of the homeowners’ behavior, or firms don’t observe status of homeownership and tend to pool renters and owners into a single labor market.

However, this paper was criticized by Munch, Rosholm, and Svarer. They pointed out that Coulson and Fisher didn’t address the potential endogeneity of the home owner variable, which made it unclear if the positive labor market outcomes for home owners are causal or spurious.

The economics of the tenure system

The degree of job security for tenured faculty is higher relative to other kinds of jobs, but whether it is excessive is a different question.

The tenure system provides higher job security than a for-profit company would, but the monetary compensation is lower.

The correct view of the tenure contract is that universities get high-priced talent at a low monetary cost; they pay instead by providing job security.

While tenure provides job security, it doesn't guarantees a lifetime increase in salaries.

The disincentive of tenure system:
Untenured faculty view tenure as a incentive to work hard, but the desire to earn tenure also makes them cautious during the pre-tenured years. Many of them fear that unconventional teaching would impair their chance to get the tenure and thus they conform to conventional teaching and research topics that would pay off in a shorter time period. But when they take such mainstream teaching styles and research methods, the cost of innovative research and teaching at post-tenure career would be huge because they have locked in and failed to adopt more daring ways.

Dining and Housing

Student dining and housing are enterprise units in some schools, which means that they are expected to fully cover their operating and capital costs and receive no subsidies from the general operating budget of the university. But their operation still have impact on the rest of the university.

Higher dining rates increase the total costs of attending the university. It is the total cost of attending the school, not its tuition and fees, that influences accepted students' decisions to attend the school. It is also the total costs that determine the financial aid that is provided for students. Increased financial aid costs or reduced tuition revenues both mean that less money will be available to spend on the academic functions to the universities.

Intercollegiate athletics and gender equity

Even if the athletics department loses money on its operation, the claim is made that these sports are investments that generate considerable funding in the form of alumni contributions to the university as a whole.

A number of academic studies confirm that football bowl game appearances and basketball appearances in the NCAA men's basketball tournament have a positive effect both on the contributions that universities receive from alumni and on the quality of their entering students.

Intercollegiate athletics is more a participation activity than a spectator activity for students at Ivy League universities.

Public universities have long used success on the athletic field as a way of generating alumni and political support for their institution. To compete on the playing field with the public institutions in their conferences, Stanford, Duke, and Northwestern have all adopted the conference policy of awarding athletic scholarships.

Gender-equity efforts will have real financial cost if a university isn't able to bring itself to deeply cut male athletic programs. Sometimes gender-equity requirements add to the cost of existing women's sports.

State higher education cuts

Every state but Vermont is required by its constitution to balance its budget every year. In recessions when tax revenues fall and social welfare expenditure like Medicaid and TANF increases, either tax should be increased or some other public expenditure has too be cut.

But this can only explains the case of community colleges.

Baumol disease problem in higher education. It doesn't fully explain why college tuition is rising so much.

Now that there are many more PhDs, especially in the humanities, than tenure-track spots for them, the salaries of instructors are actually falling as universities turn to adjuncts. That directly contradicts the Baumol explanation.

 Robert Martin at Centre College did a research showing that between 1987 and 2008, full professor salaries increased by an average of 0.9 percent a year, and assistant professor salaries by a measly 0.7 percent a year. But support staff salaries grew at more than double that rate. If the core act of teaching is driving costs higher, that just shouldn't be happening.

A more plausible theory might be Bowen theory: universities will spend all the money they can possibly raise. If they raise more than they need for educational objectives, they will spend it on non-educational uses like climbing walls and nicer buildings.
Revenue theory of cost:
"

1. "The dominant goals of institutions are educational excellence, prestige, and influence."

2. "There is virtually no limit to the amount of money an institution could spend for seemingly fruitful educational ends."

3. "Each institution raises all the money it can."

4. "Each institution spends all it raises."

5. "The cumulative effect of the preceding four laws is toward ever increasing expenditure."

For details, read the paper by Ronald Martin and R. Carter Hill.

Three reasons tuition is rising

Research universities are spending too much. Even the record-high tuition cannot make up the volume of spending.

For many public universities, they rise tuition to shift cost because their support from state and local government has been shrinking. Community colleges have to keep cutting spending despite rise of tuition.

For non-research schools like liberal and arts colleges, their spending is increasing, yet their tuition is increasing more because they have to compensate for decline of donation and make up the new spending.

Source: Washington Post