Evaluating Institutional Changes in Education and Wage Policy

Abstract: This thesis consists of four self-contained essays. Essay I (written with Roope Uusitalo) studies the effects of school choice on segregation. We analyse a reform in Stockholm that changed the admission system of public upper secondary schools. Before 2000, students were assigned to their nearest school, but from the fall of 2000, students can apply to any school, and admission is based on grades only. The distribution of students over schools changed dramatically as a response to extending school choice. As expected, segregation by ability increased. However, segregation by family background, as well as, segregation between immigrants and natives also increased significantly. Furthermore, the increase in segregation between immigrants and natives is not explained by differences in prior achievement.Essay II studies the effects of school choice on student achievement by analysing the Stockholm admission reform. Since all schools became open for application from anyone, and funding follows the students, the reform imposed strong incentives for school competition. It is shown that the reform has contributed to increase the between school variance in student outcomes. More importantly, the results indicate that students in Stockholm perform no better with increased choice availability. Essay III evaluates the introduction of individual wage bargaining for Swedish teachers. A centralized bargaining structure with wage scales was in 1996 replaced by a decentralized one, where teachers now negotiate their own wages. This paper investigates whether this system was a binding constraint, by studying the earnings structure of teachers during the 1990s. The results indicate reform effects, most pronounced for compulsory school teachers; both the age profile of earnings and earnings dispersion shifted. Furthermore, there are no indications that the returns to education and certification increase after the reform.Essay IV (written with Peter Fredriksson) examines the relationship between unemployment benefits and unemployment using Swedish regional data. To estimate the effect of an increase in unemployment insurance (UI) on unemployment we exploit the fact the generosity of UI varies regionally because there is a ceiling on benefits. The actual generosity of UI varies within region over time due to, e.g., differences in expected regional wage growth and variations in the benefit ceiling. We find that the actual generosity of UI does matter for regional unemployment. Increases in the actual replacement rate contribute to higher unemployment. We also show that removing the wage cap in UI benefit receipt would reduce the dispersion of regional unemployment.