Research

This paper examines the effects of tuition-free higher education (TF) policies on student enrollment and academic performance, focusing on the 2016 Chilean reform that eliminated higher education tuition fees for students from the lowest five income deciles. Using a difference-in-differences approach, we find that TF increased enrollment among eligible students by around 4 percentage points—concentrated among lower-ability students—and both reduced dropout rates and increased graduation rates among students enrolled before the reform. For post-reform cohorts, these effects diminish: graduation and on-time graduation gains persist but are smaller, and the dropout reduction vanishes. To disentangle the role of student effort from composition effects, we develop a dynamic structural model in which students choose effort levels in response to financial incentives. The model reproduces the enrollment response estimated by difference-in-differences and its concentration among lower-ability students. Counterfactual simulations show that reintroducing annual progress requirements reduces the cost per additional graduate from $108,000 to $70,000, but widens socioeconomic gaps in graduation. Minimum entry scores would raise the cost per additional graduate nearly threefold and leave the socioeconomic gap almost unchanged. Phasing out the benefit for middle-income students and providing a stipend to the poorest raises graduation as much as TF does, at lower cost and with a smaller socioeconomic gap.

The literature on returns to education has focused on years of schooling and fields of study, and less on whether post-secondary education is vocational or academic. We study how this choice affects occupations and wages in Germany. We estimate a dynamic semi-structural model of completed post-secondary education and first occupation choice, using the German Socio-Economic Panel. Occupations are described by their cognitive, interpersonal and manual task content, and selection runs through latent cognitive and non-cognitive abilities. Cognitive ability strongly predicts post-secondary attainment, especially university, while non-cognitive ability plays no role once cognitive ability is accounted for. Conditional on abilities and occupational tasks, an apprenticeship raises first-job hourly wages by 11% relative to basic education, and a university degree by 45%. Vocational degrees move workers towards manual and cognitive occupations and away from interpersonal ones. This occupational sorting explains only a modest part of the wage returns to education (8 to 20%), and almost none of the gap between university and apprenticeship graduates, which arises within occupations.

While small-scale educational interventions provide valuable insights into effective investments, large-scale education programs may generate substantial general equilibrium (GE) effects that alter their ultimate impact on welfare and inequality. This paper analyzes the consequences of a large-scale college enrollment expansion in Chile, explicitly accounting for GE effects in both education and labor markets, to understand how firms adjust their demand for skill-biased labor in response to increased college graduate supply. The model enables us to decompose observed wage changes into individual returns to education and GE effects, revealing how firm responses shape education decisions and ultimately affect the distribution of earnings. By incorporating both household education choices and firm production decisions, this framework provides a comprehensive assessment of how large-scale education expansions affect welfare and distributional outcomes.

Young Spaniards leave the parental home at around 30, among the latest ages in Europe. In this project, I study how job insecurity, housing costs and public policy shape that decision. First, I evaluate the Renta Básica de Emancipación (2008–2011), a monthly rent subsidy for 22–30 year-olds. Exploiting its age-eligibility cutoff, I find no detectable effect of the transfer on the probability of leaving home. Second, I develop a dynamic discrete choice model in general equilibrium. In it, young people choose each year whether to stay with their parents, rent or buy, and how hard to search for a permanent job, while rents respond to housing demand. I use the model to simulate rent subsidies, mortgage guarantees and labour market reforms.

Weather vulnerability is often assessed using historical data, but this can be very misleading in a world of changing climate. Weather refers to short-term atmospheric conditions, while climate is the weather averaged over a long period. With climate change, some places are becoming wetter, some drier, and extreme weather events, such as heatwaves, floods, droughts, and tropical cyclones, are becoming more likely. Hence, the nature of weather risks will vary considerably. Despite the magnitude of this shift, there is currently no widely accepted method for bringing climate change into catastrophe risk modeling. The objective of this note is to review, compare, and contrast the different techniques used in this literature to include climate change into vulnerability analysis. To do so, it summarizes recent research papers exploring how to bring climate change into catastrophe risk modeling. The note builds on this review to propose and explain a robust methodology and highlight its potential caveats. As such, this note is a first step towards unifying approaches and disseminating the analysis of climate change in vulnerability analysis. The method proposed in this note can be applied by researchers, economists, and public policy practitioners to study a wide range of topics, from the impact of climate change on diseases to stress-testing social protection programs.