Human Capital, Institutions, and Incentives: Micro and Macro Perspectives

This dissertation consists of four essays on human capital, institutions, and incentives. In the first essay, I investigate the effects of voucher-school competition on educational outcomes in Chile. I present a theoretical model that produces three empirical predictions: voucher-school competition 1) improves student outcomes; 2) may put stronger pressure on public schools to increase quality; and 3) has weaker effects when public school budget constraints are softer. I exploit the interaction of the number of Catholic priests and the institution of the voucher system as a potentially exogenous determinant of voucher school entry. Using this instrument, I confirm the main predictions of my theoretical model. In the second essay, I show that cross-country differences in schooling persist to the present because colonial factors influence the extent of institutional variables, such as democracy and political decentralization. By using the number of native cultures before colonization as an instrument for political decentralization, I show that the degree of democratization positively affects the development of primary education, whereas political decentralization is the more important explanation for differences in higher levels of schooling. In the third essay, coauthored with Robert Woodberry, we show that competition between Protestant and Catholic missionaries increased schooling in former colonies. Our evidence implies that Protestant missionaries increased schooling in Catholic countries, and that the impact of Protestant and Catholic missionaries on educational outcomes was similar when missionaries of both denominations faced the same legal and institutional treatment. We interpret these results in the context of an economic rationale in which different institutions created differences in competitive pressures faced by Catholic and Protestant missionaries. Finally, in the fourth essay, I investigate the evolution of the skill premium in Chile over the last decades. I present evidence that patterns of skill upgrading in Chile have followed the evolution of the same variable in the US, consistent with a model of endogenous technological choice where new technologies are produced in developed countries and adopted in developing economies. Thesis Supervisor: Daron Acemoglu Title: Charles P. Kindleberger Professor of Applied Economics Thesis Supervisor: Dora L. Costa Title: Professor of Economics