Money Matters? Essays on human capital accumulation, occupational choice and worker productivity.

This PhD thesis consists of three chapters in the topic of applied labour economics. The first chapter investigates the determinants of higher education (HE) participation using new data on university-related subjective expectations elicited from parents and young people in the Innovation Panel of the UK Household Longitudinal Study. We find that differences in HE aspirations can, partially, be explained by differences in the expected returns to a degree and that individuals adjust their university-related beliefs and subjective expectation in response to a light touch information treatment. The second chapter estimates the determinants of occupational choice after graduation. Specifically we look at the effect that labour market conditions have on a graduate’s decision to enrol onto an initial teacher training programme (TTP). We find that labour market conditions have no effect on the probability that a graduate will go into a TTP, but heterogeneity analysis suggests that periods of high unemployment impact the composition of graduates who enter the teaching profession. Graduating during a period of low labour demand has an effect on diversity (more male graduates and more ethnic minority graduates), subject specific shortages (more physics graduates) and composition of graduates from different Higher Education institutions. The third chapter analyses whether higher relative wages can motivate teachers to work harder, or more productively, in any way that affects pupil outcomes. Consistent with the predictions of the efficiency wage model, we find that teachers’ relative wages have a positive effect on their pupils’ cognitive outcomes (measured by test scores), with an effect size similar to a one pupil reduction in class sizes or an additional hours of weekly tuition for a 10 percentage change in relative wages. In addition, we find that relative wages have a positive effect on pupils’ enjoyment of learning.