Recent Research

  • Job Market Paper 2017

    Job Market Paper.

    This paper investigates the determinants and consequences of entry into and exit from self-employment over the life cycle. It integrates traditional models of dynamic career choice that feature human capital investment with models of business start-up that feature costly capital investment. Applying machine learning methods to matched worker-firm data from Sweden, I isolate seven distinct patterns of participation in self-employment as part of broader life-cycle employment profiles. These patterns are rationalized using a dynamic Roy model with both human capital and physical capital. I estimate the structural model and use it to evaluate policies designed to promote self-employment. Cognitive and non-cognitive skills, education, and past work experience are important determinants of which types of businesses individuals start, how much capital they employ, and how long they remain in self-employment. Subsidies that incentivize self-employment are generally ineffective, both in terms of promoting long-lasting firms and in terms of improving the welfare and earnings of those induced to enter self-employment.
  • JPE 2017

    James J. Heckman, John Eric Humphries,and Gregory Veramendi, forthcoming in the Journal of Political Economy, 2017.

    This paper estimates returns to education using a dynamic model of educational choice that synthesizes approaches in the structural dynamic discrete choice literature with approaches used in the reduced form treatment effect literature. It is an empirically robust middle ground between the two approaches which estimates economically interpretable and policy-relevant dynamic treatment effects that account for heterogeneity in cognitive and non-cognitive skills and the continuation values of educational choices. Graduating college is not a wise choice for all. Ability bias is a major component of observed educational differentials. For some, there are substantial causal effects of education at all stages of schooling.
  • JOE 2016

    James J. Heckman, John Eric Humphries,and Gregory Veramendi, published in the Journal of Econometrics, 2016.

    This paper develops robust models for estimating and interpreting treatment effects arising from both ordered and unordered multi-stage decision problems. Identification is secured through instrumental variables and/or conditional independence (matching) assumptions. We decompose treatment effects into direct effects and continuation values associated with moving to the next stage of a decision problem. Using our framework, we decompose the IV estimator, showing that IV generally does not estimate economically interpretable or policy-relevant parameters in prototypical dynamic discrete choice models, unless policy variables are instruments. Continuation values are an empirically important component of estimated total treatment effects of education. We use our analysis to estimate the components of what LATE estimates in a dynamic discrete choice model.
  • UofC Press 2014

    James J. Heckman, John Eric Humphries, and Tim Kautz, published by The University of Chicago Press, 2014.

    Achievement tests play an important role in modern societies. They are used to evaluate schools, to assign students to tracks within schools, and to identify weaknesses in student knowledge. The GED is an achievement test used to grant the status of high school graduate to anyone who passes it. GED recipients currently account for 12 percent of all high school credentials issued each year in the United States. But do achievement tests predict success in life?

    The Myth of Achievement Tests shows that achievement tests like the GED fail to measure important life skills. James J. Heckman, John Eric Humphries, Tim Kautz, and a group of scholars offer an in-depth exploration of how the GED came to be used throughout the United States and why our reliance on it is dangerous. Drawing on decades of research, the authors show that, while GED recipients score as well on achievement tests as high school graduates who do not enroll in college, high school graduates vastly outperform GED recipients in terms of their earnings, employment opportunities, educational attainment, and health. The authors show that the differences in success between GED recipients and high school graduates are driven by character skills. Achievement tests like the GED do not adequately capture character skills like conscientiousness, perseverance, sociability, and curiosity. These skills are important in predicting a variety of life outcomes. They can be measured, and they can be taught.

    Using the GED as a case study, the authors explore what achievement tests miss and show the dangers of an educational system based on them. They call for a return to an emphasis on character in our schools, our systems of accountability, and our national dialogue.
  • JOLE 2012

    James J. Heckman, John Eric Humphries, Paul A. LaFontaine, and Pedro L. Rodriguez, published in the Journal of Labor Economics, 2012.

    The option to obtain a General Educational Development (GED) certificate changes the incentives facing high school students. This article evaluates the effect of three different GED policy innovations on high school graduation rates. A 6-point decrease in the GED pass rate produced a 1.3-point decline in high school dropout rates. The introduction of a GED certification program in high schools in Oregon produced a 4% decrease in high school graduation rates. Introduction of GED certificates for civilians in California increased the dropout rate by 3 points. The GED program induces students to drop out of high school.