Kristoffer Sylvester Markwardt: Education and Unemployment Insurance
This dissertation consists of three self-contained chapters. The first chapter estimates long-run private returns to schooling. We study men who were randomly assigned to nine months of military service by a peacetime draft lottery. Military service was a disruption to the draftees' educational career and thus increased the relative cost of individual human capital investment. We find that military service reduced schooling by nine months for these men. Exploiting this exogenous variation in schooling, we estimate: (1) the average private financial returns to schooling over the entire working career; and (2) the father-child intergenerational transmission of schooling. We find a strong schooling effect on lifetime labor earnings but the effect does not carry over to the next generation.
The second chapter focuses on two competing explanations for the private financial returns to schooling: the job market signaling model and the human capital model. The literature suggests different strategies to test one against the other. I apply two existing empirical tests for job market signaling within the same institutional setting and create a link between them, using available information on sibling type, in particular twin type. I then propose a new, more precise test of this hypothesis, exploiting differences in the degree of genetic similarity between monozygotic and dizygotic twins and the panel structure of my data. My findings are in line with the literature and consistent with (some degree of) job market signaling.
The final chapter is about the effect of liquidity on choices under uncertainty, investigating whether private informal insurance (a liquid buffer stock) is an inferior, dominated alternative to formal public insurance, or if the two options are mutual substitutes. Exploiting a sudden introduction of home equity loans in Denmark, we show that homeowners who experienced a positive liquidity shock were less likely to sign up for unemployment insurance afterwards compared to other homeowners, thereby showing that private informal insurance can substitute formal public insurance.