80 2018 Microeconometric Analysis ,#Individual and Institutional Determinants of Education and Occupational Choice Natalie Obergruber ifo 80 BEITRÄGE 2018 zur Wirtschaforschung Microeconometric Analysis of Individual and Institutional Determinants of Education and Occupational Choice Natalie Obergruber Herausgeber der Reihe: Clemens Fuest Schrileitung: Chang Woon Nam Bibliografische Information der Deutschen Nationalbibliothek Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über http://dnb.d-nb.de abrufbar. ISBN: 978-3-95942-053-2 Alle Rechte, insbesondere das der Übersetzung in fremde Sprachen, vorbehalten. Ohne ausdrückliche Genehmigung des Verlags ist es auch nicht gestattet, dieses Buch oder Teile daraus auf photomechanischem Wege (Photokopie, Mikrokopie) oder auf andere Art zu vervielfältigen. © ifo Institut, München 2018 Druck: ifo Institut, München ifo Institut im Internet: http://www.cesifo-group.de Preface Natalie Obergruber prepared this study while she was working at the ifo Center for the Eco- nomics of Education. The study was completed in March 2018 and accepted as doctoral thesis by the Department of Economics at the University of Munich. It consists of four distinct empirical analyses – two on the determinants of education and two on the determinants of occupational choice. For both choices, individual and institutional determinants are investigated. The econo- metric analyses are based on panel data from the National Educational Panel Study (NEPS), historical census data of the Statistical Oice of the German Empire, historical maps and studies from Sering 1897, Verein für Socialpolitik 1883, Grossherzogliches Ministerium des Inneren 1883, Miaskowski 1882-1884, Fick 1895, and Kra 1930 which are combined with modern data from the German Statistical Oice and the BBSR. This study analyses which individual and institutional factors (causally) influence individuals in their educational career and in their choice for an occupation. Chapter 2 explores consequences of parental separation for cognitive skill development of children. In the year before parental separation occurs children are negatively aected in their cognitive skill development. Chapter 3 investigates the con- sequences of an institutional reform in the German school system which awards high track school drop outs with lower track school degrees if they accomplished 9th grade. Aer the reform students are less likely to switch between schools and tracks and surprisingly are more likely to successfully finish the high-track school and enter university. Chapter 4 predicts the choice of math-intensive occupations by school grades. School grades are aected by students’ ability and tastes and may furthermore contain pure signals of achievement (based on rank in class). We find that the strong association between grades and math intensity of occupations is completely explained by individuals’ dierences in tastes. Chapter 5 shows that occupational choice is influenced by the distribution of land, a store of wealth in an agricultural society. We find that areas with more equally distributed land started to industrialize earlier particularly in innovative manufacturing. Keywords: dierence-in-dierences, economic inequality, industrialization, panel data, NEPS JEL-Codes: I21, I24, I28, J12, J13, J24, N13, N33, O33, O47 iii Acknowledgement This thesis developed with comments and help of numerous people. First and foremost, I thank my supervisor Ludger Wößmann for his advice and support during the last four years. I am also grateful to Uwe Sunde for being my second supervisor and to Oliver Falck who joins my dissertation committee and who has always had time to discuss my research projects. Special thanks are attributed to my coauthors for their collaboration, help, advice, and patience (in alphabetical order) Johannes Eigner and Simon Jäger (chapter 5), Marc Piopiunik (chapter 4), and Larissa Zierow (chapter 3). I am especially indebted to Simon Jäger who hosted me for two weeks for collaboration at Harvard University. I am also grateful to my current and former colleagues at the ifo Center for the Economics of Education for inspiring discussions and helpful suggestions: Annika Bergbauer, Franziska Binder, Ulrike Baldi-Cohrs, Francesco Cin- nirella, Bernhard Enzi, Elisabeth Grewenig, Franziska Hampf, Franziska Kugler, Sarah Kersten, Philipp Lergetporer, Sven Resnjanskij, Jens Ruhose, Ruth Maria Schüler, Lisa Simon, and Simon Wiederhold. Particularly, I want to thank Katharina Werner for sharing an oice patiently over years, for discussions, support, and walks. I also received many comments and suggestions from other colleagues and friends at the University of Munich and at conferences and workshops. Unfortunately, not everybody can be mentioned here but special thanks go to Nadine Geiger, Alexandra Heimisch, Guido Heineck, Markus Nagler, Judith Saurer, and Nina Smith. v Microeconometric Analysis of Individual and Institutional Determinants of Education and Occupational Choice Inaugural-Dissertation zur Erlangung des Grades Doctor oeconomiae publicae (Dr. oec. publ.) an der Ludwig-Maximilians-Universität München 2018 vorgelegt von Natalie Obergruber Referent: Prof. Dr. Ludger Wößmann Korreferent: Prof. Dr. Uwe Sunde Promotionsabschlussberatung: 11. Juli 2018 Erstgutachter: Prof. Dr. Ludger Wößmann Zweitgutachter: Prof. Dr. Uwe Sunde Drittgutachter: Prof. Dr. Oliver Falck Tag der mündlichen Prüfung: 03. Juli 2018 Contents Acknowledgement v List of Figures xiii List of Tables xv 1 Introduction 1 1.1 Determinants of education . 2 1.1.1 Family background . 3 1.1.2 Institutions . 4 1.2 Determinants of occupational choice . 5 1.3 Outline of the thesis . 6 1.4 What do we learn? . 8 2 Separating Parents 11 2.1 Introduction . 11 2.2 Data . 13 2.2.1 NEPS students within the German school system . 13 2.2.2 Data structure . 14 2.2.3 Definition of separation . 14 2.2.4 Summary statistics . 15 2.3 Empirical strategy . 17 2.4 Separation and cognitive skills . 18 2.4.1 Level dierences in cognitive skills . 18 2.4.2 Dierences in cognitive skill development . 19 2.4.3 Grades . 20 2.5 Mechanism: Family inputs shocked by separation . 21 2.6 Robustness checks . 22 2.6.1 Reversed causality and omitted variables . 23 2.6.2 Heterogeneity of separation cohorts . 24 2.6.3 External validity . 24 2.7 Conclusion . 26 2.8 Figures and tables . 28 2.9 Appendix A . 37 ix Contents 3 Awarding a Low-Track School Degree 47 3.1 Introduction . 47 3.2 Institutional background . 51 3.3 Data . 53 3.4 Identification strategy . 56 3.5 Main Results . 58 3.5.1 School careers and degrees . 58 3.5.2 Occupational outcomes . 60 3.5.3 Selection into the academic track . 60 3.6 Heterogeneity by parents’ school degree . 61 3.7 Robustness checks . 62 3.7.1 Eect on the whole population . 62 3.7.2 Linear state trends . 63 3.7.3 Leave-one out . 63 3.8 Conclusion . 63 3.9 Figures and tables . 65 3.10 Appendix B . 78 4 Predicting Choice of Math-Intensive Occupations 85 4.1 Introduction . 85 4.2 Data . 89 4.2.1 NEPS panel data . 89 4.2.2 Math intensity of occupations . 90 4.2.3 Summary statistics . 91 4.3 Empirical strategy . 92 4.4 Grade dierence and math-intensity of occupation . 93 4.4.1 Baseline results . 93 4.4.2 Parental occupation . 95 4.4.3 Grade dierence as signal of own subject-specific ability . 96 4.4.4 The role of employers . 97 4.4.5 Dierences in tastes . 97 4.5 Conclusion . 99 4.6 Figures and tables . 100 4.7 Appendix C . 110 5 Long-Term Consequences of Inequality 119 5.1 Introduction . 119 5.2 Historical background of inheritance rules . 123 5.3 Data . 124 5.3.1 Inheritance rule . 125 x Contents 5.3.2 Data sources . 125 5.3.3 Summary statistics . 127 5.4 Empirical strategy . 127 5.5 Inequality . 129 5.5.1 Historical inequality . 129 5.5.2 Inequality today . 130 5.6 Economic development . 130 5.6.1 Level of economic development today . 130 5.6.2 Development before industrialization . 131 5.6.3 Development from industrialization onward . 133 5.7 Mechanism: innovation and occupational choice . 133 5.8 Robustness checks . 135 5.8.1 Inheritance rule . 135 5.8.2 RD sample restriction . 135 5.9 Conclusion . 135 5.10 Figures and tables . 137 5.11 Appendix D . 155 References 167 xi List of Figures Figure 2.1: Structure of NEPS panel data on 10-year olds . 28 Figure 2.2: Mean reading test scores 2010 and 2012 by year of separation and for control group . 29 Figure 2.3: Demeaned reading test scores by time distance to separation and separation cohort . 30 Figure 3.1: The Structure of the German School System . ..