returns to an MBA

In a recent issue of Economic Inquiry, Wayne Grove (Le Moyne) and Andrew Hussey (U Memphis) estimate the expected return from earning an MBA. They compare the effects of field of study and school quality. From their abstract:

We find approximately 7% returns for most MBAs but roughly double that for finance and management information systems (MIS). Thus, MBA area of study can matter as much or more than program quality: only attending a top 10, but not 11-25, MBA program trumped studying finance and MIS at a nontop 25 program.

Read the paper here.

blondes make more money

In a new paper in Economics Letters, David Johnston (Queensland Tech) shows that controlling for other characteristics, blonde women receive significantly higher wages than non-blondes. What's more, blonde women seem to have an advantage in the marriage market, snagging husbands who themselves have higher wages.

Link to the paper here.

the logic of life

As you may imagine, I enjoy reading the popular press books and articles describing new economic research. Some are better than others. Most recently, I finished Tim Hartford's The Logic of Life, which is amongst the best popular press economics books (also amongst the best are Freakonomics and Super Crunchers). Some of the topics include game theory and poker, the market for marriage and divorce, the job market (and why your lazy boss is paid so much), rational racism (rational not good), and why subsidizing city living would be good for the environment. It's worth a read.

Read some reviews here. Buy it here.

blonde and brunette fundraisers

When someone shows up on our doorstep looking for a charitable donation, does our potential donation depend on how attractive the fundraiser is? Does it depend on their hair color?

In a cute little paper published in Economics Letters, Michael Price shows that donations do depend on these factors. The better looking the fundraiser, the more we are likely to contribute. (That result isn't so surprising, given that a number of other papers have found a correlation between earnings and beauty.) He also shows that blondes bring in more than brunettes--even controlling for one's physical attractiveness. This means that the benefits of being beautiful are more significant for blondes than for brunettes. This blonde advantage is driven entirely from the donations of Caucasian households (non-white households display no blond preference).

Download the paper

teacher testing & teaching quality

By requiring teachers to pass tests or receive certifications, we can ensure that public school teachers obtain some minimum level of education and knowledge. Does imposing such requirements increase student performance?

Joshua D. Angrista (MIT) and Jonathan Guryanb (U Chicago) find no evidence that increasing teacher requirements increases teacher quality. This may be because the increased requirements makes it more difficult to become a teacher, which likely affects the types of students who choose to become teachers. It also forces schools to hire along this one-dimension, even if the school believes that an uncertified teacher would make the better teacher.

What's more, the authors show that the increase in requirements increases teacher wages (without increasing teacher quality). This is unsurprising since increasing teacher requirments likely decrease the supply of teachers--in the labor market this means higher wages. This article suggests that increasing teacher teasting and certification requirments increases the cost of education without increasing the quality of education.

link to the article

pay peanuts, get monkeys

In American academics, professors in certain fields make significantly more than professors in other fields. Here salaries are usually correlated with the salaries paid in the private (non-academic) sector. Outside of America, on the other hand, it is often the case that all assistant professors are paid (roughly) the same, and all full professors are paid (roughly) the same, independent of one's field. That's only fair, right? If the history prof and the engineering prof both have to teach and conduct research, why should the engineering prof earn more?

New Zealand is one such country in which academic salaries are independent of one's field. Using data from New Zealand universities, Glenn Boyle shows that if you don't pay the engineering prof more, the quality of engineering research will fall. This is because the best engineers will find it more attractive to accept high-paying private sector jobs. Academic research productivity in different fields depends the how a field's academic salary compares to salaries outside of academia. This suggests that if academic economists earn the same as English professors, the best economists will find it even more attractive to accept a high-paying job on Wall Street, and the quality of economics research will fall. A similar effect isn't present for English professors because they don't have as high-paying of outside options.

read the article

explaining differences in ceo pay

Why does a CEO of one company make more than a CEO of another company? Is a million dollar pay difference due to differences in ability? Marko Tervio of the Haas School of Business at Berkeley suggests not. His paper in the most recent American Economic Review suggests that variation in CEO pay is mostly explained by firm characteristics, not differences in ability.

This means that a CEO at a Fortune 100 company probably isn't that much better than a CEO at a Fortune 1000 company. But they earn more because their firms earn more.

Read the article