Two NBER WPs that caught my eye

Naidu has written some good stuff on Southern labor markets in the past, and the second one is of interest because of a new approach I'm taking to my Sloan/dissertation work around major choice based on uncertainty about occupational returns.

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When the Levee Breaks: Black Migration and Economic Development in the American South

Richard Hornbeck, Suresh Naidu

NBER Working Paper No. 18296
Issued in August 2012
NBER Program(s):   DAE   EFG

In the American South, post-bellum economic stagnation has been partially attributed to white landowners' access to low-wage black labor; indeed, Southern economic convergence from 1940 to 1970 was associated with substantial black out-migration. This paper examines the impact of the Great Mississippi Flood of 1927 on agricultural development. Flooded counties experienced an immediate and persistent out-migration of black population. Over time, landowners in flooded counties dramatically mechanized and modernized agricultural production relative to landowners in nearby similar non-flooded counties. Landowners resisted black out-migration, however, benefiting from the status quo system of labor-intensive agricultural production.

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Risk and Returns to Education

Jeffrey Brown, Chichun Fang, Francisco Gomes

NBER Working Paper No. 18300
Issued in August 2012
NBER Program(s):   AP   ED   LS   PE

We analyze the returns to education in a life-cycle framework that incorporates risk preferences, earnings volatility (including unemployment), and a progressive income tax and social insurance system. We show that such a framework significantly reduces the measured gains from education relative to simple present-value calculations, although the gains remain significant. For example, for a range of preference parameters, we find that individuals should be willing to pay 300 to 500 (200 to 250) thousand dollars to obtain a college (high school) degree in order to benefit from the 32 to 42 percent (20 to 38 percent) increase in annual certainty-equivalent consumption. We also explore how the measured value of education varies with preference parameters, by gender, and across time. In contrast to findings in the education wage-premia literature, which focuses on present values and which we replicate in our data, our model indicates that the gains from college education were flat in the 1980s and actually decreased significantly in 1991-2007 period. On the other hand, the gains to a high school education have increased quite dramatically over time. We also show that both high school and college education help to decrease the gender gap in life-time earnings, contrary again to the conclusion from wage premia calculations.