Endogeneity Problems in Multilevel Estimation of Education Production Functions: an Analysis Using PISA Data

With Said Hanchane.

LLAKES Research Paper N° 14.

This paper explores endogeneity problems in multilevel estimation of education production functions. The focus is on level 2 endogeneity which arises from correlations between student characteristics and omitted school variables.We first develop a theoretical model in order to show that school and peer characteristics are the by-product of student background. This theoretical framework helps the identification of the hypotheses we would like to test within the empirical part. From an econometric point of view, the correlations between student and school characteristics imply that the omission of some variables may generate endogeneity bias. Therefore, in the second section of the paper, an estimation approach based on the Mundlak (1978) technique is developed in order to tackle bias and to generate consistent estimates.The entire analysis is undertaken in a comparative context between three countries: Germany, Finland and the UK. Each one of them represents a particular system. For instance, Finland is known for its extreme comprehensiveness, Germany for early selection and the UK for its liberalism. These countries are used to illustrate the theory and to prove that the level of bias arising from omitted variables varies according to the characteristics of education systems.

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The Chimera of Competitiveness: Varieties of Capitalism and the Economic Crisis.

With Andy Green and John Preston.

LLAKES Research Paper N° 8.

In this paper we assess the different definitions and theories of economic competitiveness at the firm and national levels. First we contrast the theories of classical liberal economists with those of the German historical school of national economics, noting the importance of the historical school for theories of national economic competitiveness. Drawing on the comparative political economy literature on ‘varieties of capitalism’, we then discuss the factors underlying competitiveness in social market economies, social democratic economies, and liberal economies.These models of capitalism are compared under six headings: labour markets and labour market institutions; financial markets; corporate funding and governance; inter-firm relations; the role of the state; and economic culture and history. In the penultimate section of the paper we discuss how the different models of capitalism have responded to the economic crisis and the impact of the crisis on their economic competitiveness. The paper concludes with a summary of the key points to emerge from the analysis and looks to how the scene may evolve as national economies begin to adapt.

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The Anatomy of Inequalities in Educational Achievements: An International Investigation of the Effects of Stratification

LLAKES Research Paper N° 3

This paper analyses the mechanisms of stratification and inequalities in achievements. The main objective is to determine how stratification leads to unequal educational outcomes and how inequalities are channelled through student characteristics, school characteristics and peer effects.

On the one hand, a descriptive analysis is used to shed light on the education systems of the five selected countries and to provide insight into the functioning of stratification. The countries are Japan, the UK, Italy, Germany and Finland, and the dataset used is PISA 2003. On the other hand, a multilevel econometric model is elaborated in order to quantify the effects of student, school and peer characteristics on performance scores. The results on the regressions are then interpreted according to the institutional context of each country. In the last section, policy implications, based on the regression results, are derived.

JEL Classification: I20, I21, H52.

Keywords: Educational stratification, achievement inequalities, comparative analysis of education systems, multilevel modelling.

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Educational Quality, Communities, and Public School Choice: a Theoretical Analysis

In this paper, we develop a multicommunity model where public mixed finance and private schools coexist. Students are differentiated by income, ability and social capital. Schools maximize their profits under a quality constraint; the pricing function is dependent on the cost of producing education and on the position of an individual relatively to mean ability and mean social capital. Income plays an indirect role since it determines the type of schools and communities that can be afforded by a student given his ability and social capital.

Three dimensional stratification results from schools’ profit maximization and individuals’ utility maximization. We study majority voting over tax rates; property tax is used to finance education not only in pure public schools but also in mixed finance schools. We provide the necessary conditions for the existence of a majority voting equilibrium determined by the median voter. Finally, we analyze the consequences of introducing public school choice.

JEL Classification: I20, H52, R31.

Keywords: Education market, majority voting equilibrium, peer group effects, formation of communities, school choice.

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School Choice: Income, Peer Effect and the Formation of Inequalities.

Abstract: In this paper, we analyze the equilibrium on the market for schooling where both public and private schools coexist and where individuals are differentiated by income and ability. We introduce a non linear in means model of peer effect by shedding the light on the fact that school quality is not solely dependent on mean ability but also on the dispersion of abilities. We study the distribution of students across sectors while examining the conditions for the existence of a majority voting equilibrium in the context of non single peaked preferences. Finally, we examine the presence of a hierarchy of school qualities. In the paper we shed the light on equity problems related to the access to educational quality while analyzing the functioning of the educational system.

JEL Classification: I20, I21, H52.

Keywords: Education market, majority voting equilibrium, peer group effect, pricing discrimination, educational opportunity.

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