Now showing 1 - 5 of 5
  • Publication
    Probabilistic Aging
    (Volkswirtschaftliche Abteilung, Universität St. Gallen, CESifo WP No. 1680, 2007-01-15) ; ;
    Grafenhofer, Dominik
    ;
    The paper develops an overlapping generations model with probabilistic aging of households. We define age as a set of personal attributes such as earnings potential, health and tastes that are characteristic of a person's position in the life-cycle. In assuming a limited number of different states of age, we separate the concepts of age and time since birth. Agents may retain their age characteristics for several periods before they move with a given probability to another state of age. Different generations that share the same age characteristics are aggregated analytically to a low number of age groups. The probabilistic aging model thus allows for a very parsimonious yet rather accurate approximation of demographic change and of life-cycle differences in earnings, wealth and consumption. Existing classes of overlapping generations models follow as special cases.
  • Publication
    A Simple Model of Educational Production
    ( 2006-02-01)
    There is a large body of literature on the effect of educational resources on student performance, such as teacher qualification, class size, and physical resources in school. It is dominated by empirical studies which often find ambiguous effects of resource spending on student outcomes. The unique contribution of this paper is the provision of a framework to study educational production with differentiated input factors, which allows for closed-form solutions. We try to interpret the empirical findings on the basis of a simple theoretical model of educational production: Class size, employed school resources and student effort are endogenously determined in order to account for differences in educational achievement. We also discuss the choice of integrated vs. segregated classes. Optimum class size and school quality increase with higher discipline, while in equilibrium overall classroom disruption is equal in all classes.
  • Publication
    The Role of Endogenous Skill Choice in an Aging Society
    ( 2005-05-25)
    This paper analyzes the effects of an aging population on individual skill choices and the production structure by means of a dynamic general equilibrium model with overlapping generations and probabilistic aging. The model allows for capital-skill complementarity, which strongly affects the outcomes in a small open economy setting vs. a closed (or equivalently worldwide) economy. In an open economy with a fixed real interest rate, the necessary increase in the contribution rate discourages labor supply and depresses GDP. With a variable real interest rate, however, capital usage increases and - by the capital-skill complementarity - also employment of high skilled labor. The mobilization of highly productive labor gives a boost to GDP. Hence, the often cited adverse effects of aging are mitigated and can be overcome when taking into account a more realistic production structure.
  • Publication
    Hidden Teacher Effort in Educational Production: Monitoring vs. Merit Pay
    ( 2005-02-01)
    This paper deals with the optimality of teacher incentive contracts in the presence of costly or limited government resources. It considers educational production under asymmetric information as a function of teacher effort and class size. In the presence of costly government resources and convex effort costs, teacher monitoring - which is wasteful in principle - may be superior to merit pay in order to induce second-best teacher effort; optimum class size is not affected by informational deficiencies. If the government budget is exogenously fixed, optimum teacher effort may not be affordable, which is shown to make the case for monitoring activity instead of incentive pay even stronger.
  • Publication
    Teacher Incentives
    ( 2006-02-01)
    This chapter considers hidden teacher effort in educational production and discusses the implications of multiple teacher effort dimensions on optimum incentive contracts in a theoretical framework. The analysis of educational production in a multitask framework is a new and unique contribution of this chapter to the economics of education. We first characterize the first-best and second-best outcomes. The model is extended to address specific questions concerning teacher incentive schemes: We compare input- to output-based accountability measures and study the implication of the level of aggregation in performance measures. Against the background of the empirical evidence on the effectiveness of teacher incentives, we argue that performance measures should be as broad as possible. Further, we present the optimum contract for motivated teachers. Finally, if education is produced in teacher teams, we establish the conditions for optimum team-based and individual incentives: The larger the spillover effects across teacher efforts and the better the measurability of educational achievement, the stronger the case for team-based incentives.