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We analyze empirically the effects of urban agglomeration on Italian college graduates' work possibilities as entrepreneurs three years after graduation. We find that each 100,000 inhabitant-increase in the size of the individual's province of work reduces the chances of being an entrepreneur by 0.2-0.3 per cent. This result holds after controlling for regional fixed effects and is robust to instrumenting urbanization. Province's competition, urban amenities and dis-amenities, cost of labor, earning differentials between employees and self-employed workers, unemployment rates and value added per capita account for 40 per cent of the negative urbanization penalty. Our result cannot be explained by the presence of negative large-city differentials in returns to education either. In fact, as long as they succeed in entering the largest markets, young entrepreneurs are able to reap-off the benefits of urbanization externalities: every 100,000-inhabitant increase in the province's population raises entrepreneurs' net monthly income by 0.2-0.3 per cent.

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Several German states recently introduced tuition fees for university education. We investigate whether these tuition fees influence the mobility of university applicants. Based on administrative data of applicants for medical schools in Germany, we estimate the effect of tuition fees on the probability of applying for a university in the home state. We find a small but significant reaction: the probability of applying for a university in the home state falls by two percentage points (baseline: 69 per cent) for high-school graduates who come from a state with tuition fees. Moreover, we find that students with lower high-school grades react more strongly to tuition fees. This might have important effects on the composition of students across states.

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A number of studies have long shown that the probability of studying at university is influenced by the distance to the next university. This study shows for the first time that distance to university also influences the choice of subject/faculty and institution. Moreover, these findings are important because the distance effect in terms of these decisions is associated with significantly less risk of endogeneity than the effect in the analysis of the willingness and ambition to attend university. The results also show that distance does not influence study choices among students from the highest socioeconomic group, a finding that further indicates that distance to university is an expression of differences in the cost of a university education.

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There is an apparent inconsistency in the existing literature on graduate employment in the UK. While analyses of rates of return to graduates or graduate markups show high returns, suggesting that demand has kept up with a rapidly rising supply of graduates, the literature on over-education suggests that many graduates are unable to find employment in graduate jobs and the proportion over-educated has risen over time. Using a simple supply and demand model applied to UK data that defines graduate jobs in terms of the proportion of graduates and/or the graduate earnings markup within occupations, we find that the employment of graduates in non-graduate jobs has declined over time. Hence, there is no evidence of an over-production of graduates in the UK.

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This paper contains a survey of the recent literature devoted to the returns to schooling within a dynamic structural framework. I present a historical perspective on the evolution of the literature, from early static models set in a selectivity framework (Willis and Rosen, 1979) to the recent literature, stimulated by Keane and Wolpin (1997), and which uses stochastic dynamic programming techniques. After reviewing the literature thoroughly, I compare the structural approach with the IV (experimental) approach. I present their commonalities and I also discuss their fundamental differences. To get an order of magnitude, most structural estimates reported for the US range between 4% and 7% per year. On the other hand, IV estimates between 10% and 15% per year are often reported. The discrepancy prevails even when comparable (if not identical) data sets are used. The discussion is focused on understanding this divergence. The distinction between static and dynamic model specifications is a recurrent theme in the analysis. I argue that the distinction between the IV approach and the structural approach may be coined in terms of a trade off between behavioral and statistical assumptions. For this reason, and unless one has very specific knowledge of the true data generating process, it is neither possible, nor sensible, to claim which approach to estimation is more flexible. More precisely, I show that structural and IV approaches differ mainly at the level of (i) the compatibility of the underlying models with truly dynamic behavior, (ii) the role of heterogeneity in ability and tastes, (iii) the consideration of post-schooling opportunities, and (iv) the specification (and interpretation) of the Mincer wage equation.

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Transition patterns from school to work differ considerably across OECD countries. Some countries exhibit high youth unemployment rates, which can be considered an indicator of the difficulty facing young people trying to integrate into the labor market. At the same time, education is a time-consuming process, and enrolment and dropout decisions depend on expected duration of studies, as well as on job prospects with and without completed degrees. One way to model entry into the labor market is by means of job search models, where the job arrival hazard is a key parameter in capturing the ease or difficulty in finding a job. Standard models of job search and education assume that skills can be upgraded instantaneously (and mostly in the form of on-the-job training) at a fixed cost. This paper models education as a time-consuming process, a concept which we call time-to-educate, during which an individual faces the trade-off between continuing education and taking up a job.

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We examine ways of funding higher education, comparing upfront tuition fees with graduate taxes. The tax dominates, as volatility in future income is transferred from risk-averse students to the risk-neutral state. However, a double moral hazard problem arises when students' efforts to raise lifetime income and universities' activities to improve teaching quality are endogenized. We show that graduate taxes reduce work incentives but provide incentives to improve teaching quality. Yet if tax revenues are distributed evenly among universities there is free riding. To solve this problem each university should be allocated the revenue generated by its own alumni. In addition, we demonstrate how a budget-balancing graduate tax would encourage more people to attend university than would the equivalent upfront tuition fee.

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The interpretation of graduate mismatch manifested either as overeducation or as overskilling remains problematical. This paper uses annual panel information on both educational and skills mismatches uniquely found in the [Household Income and Labour Dynamics in Australia] HILDA survey to analyse the relationship of both mismatches with pay, job satisfaction and job mobility. We find that overeducation and overskilling are distinct phenomena with different labour market outcomes and that their combination results in the most severe negative labour market outcomes. Using panel methodology reduces strongly the size of many relevant coefficients, questioning previous cross-section results and suggesting the presence of considerable unobserved heterogeneity which varies by gender.

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Using a dataset of science and engineering graduates from 12 European countries, we analyse the determinants of labour migration after graduation. We find that not only wage gains are driving the migration decision, but also differences in labour market opportunities, past migration experience, and international student exchange are strong predictors of future migration. Contrary to our expectations, job characteristics such as the utilisation of skills in the job and involvement in innovation hardly affect the migration decision. When analysing country choice, countries such as the USA, Canada and Australia appear to attract migrants due their larger [research and development] R&D intensity. Moreover, graduates with higher grades are more likely to migrate to these countries.

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Median instructional spending per full-time equivalent (FTE) student at American colleges and universities has grown at a slower rate than the median spending per FTE in a number of other expenditure categories during the last two decades. We use institutional level panel data and a variety of econometric approaches, including unconditional quantile regression models, to analyze whether noninstructional expenditure categories influence first year persistence and graduation rates of American undergraduate students. Our most important finding is that student service expenditures influence graduation and persistence rates and their marginal effects are larger for students at institutions with lower entrance test scores and more lower income students. Put another way, their effects are largest at institutions that have lower current persistence and graduation rates. Simulations suggest that reallocating some funding from instruction to student services may enhance persistence and graduation rates at those institutions whose rates are currently below the medians in the sample.

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