Stephen Machin is Professor of Economics at the University College of London, Research Director of the Centre for Economic Performance at the London School of Economics, and Director of the Centre for the Economics of Education. Anna Vignoles is Senior Lecturer at the Institute of Education and Research Associate of the Centre for Economic Performance at the London School of Economics.

"This is a must-read for anyone interested in the economic analysis of the United Kingdom's education system. It provides a comprehensive summary of key policy issues and clarifies what the data tell us about these issues. Well-written, with helpful cross-references, the book will appeal to readers inside and outside of the UK." - Julian Betts, University of California, San Diego "The authors have taken on a formidable assignment, appealing not only to people who are familiar with the topic, but also to those who ought to know more about economics, but are not easily enticed into it." - Ted Wragg, University of Exeter"

• Preface ix List of Contributors xiii Brief Glossary xv PART 1. INTRODUCTION 1 Chapter One: Overview 3 1.1 Introduction 4 1.2 Who Gets More Education? 5 1.3 Economic Outcomes and Education 9 1.4 What Can Policy Do? 12 Chapter Two: The United Kingdom Education System in a Comparative Context by K. Hansen and A. Vignoles 13 2.1 Introduction 13 2.2 Main Features of the UK Education System 13 2.3 How Well Is the System Doing? 23 2.4 The UK Education System and the Labour Market in an International Context 29 2.5 Conclusions 34 PART 2. WHO GETS MORE EDUCATION? 37 Chapter Three: School and Teacher Effectiveness by A. Chevalier, P. Dolton and R. Levacic 39 3.1 Introduction 39 3.2 Features of the UK Schooling System 39 3.3 Incentives and Quasi-Markets 41 3.4 School and Teacher Effectiveness 45 3.5 The Impact of Resources 49 3.6 Selection and Peer Effects 53 3.7 Conclusions 55 Chapter Four: The Labour Market for Teachers by A. Chevalier and P. Dolton 57 4.1 Introduction 57 4.2 Patterns of Change in the Teacher Labour Market 58 4.3 Teacher Pay 62 4.4 Who Becomes a Teacher? 63 4.5 Feminization of Teacher Supply 65 4.6 Incentives and Teacher Rewards 66 4.7 Variations across Space and Subject 67 4.8 Non-Pecuniary Conditions 68 4.9 Conclusions 69 Chapter Five: Post-Compulsory Education and Qualification Attainment by D. Clark, G. Conlon and F. Galindo-Rueda 71 5.1 Introduction 71 5.2 Changing Patterns of Participation in Post-Compulsory Education 71 5.3 Staying On after the Compulsory School Leaving Age of 16 74 5.4 Broader Choices at 16 82 5.5 Post-16 Qualifications in the UK 86 5.6 Higher Education 90 5.7 Conclusions 95 Chapter Six: Educational Inequality and Intergenerational Mobility by J. Blanden, P. Gregg and S. Machin 99 6.1 Introduction 99 6.2 Patterns of Change in Income, Education and Education Policy 100 6.3 Measurement and Data 103 6.4 Evidence on Changes in Intergenerational Mobility and Educational Inequality 106 6.5 Conclusions 113 PART 3. ECONOMIC OUTCOMES AND EDUCATION 115 Chapter Seven: Measuring the Returns to Education by R. Blundell, L. Dearden and B. Sianesi 117 7.1 Introduction 117 7.2 Policy Relevance of the Returns to Education 118 7.3 Methodological Issues 124 7.4 Estimation Methods and Results 127 7.5 Limitations 138 7.6 Conclusions and Policy Discussion 142 7.7 Appendix: Comparing Private Rates of Return and Real Return on Debt and Equity 143 Chapter Eight: Employers' Selection Decisions: the Role of Qualifications and Tests by A. Jenkins and A. Wolf 147 8.1 Introduction 147 8.2 Why Might Employers Use Qualifications for Selection Purposes? 149 8.3 Qualifications in the Labour Market 150 8.4 What Do Employers Think Qualifications Signal? 154 8.5 Changes Over Time 159 8.6 A Heterogeneous Labour Market 162 8.7 Conclusions 166 Chapter Nine: Evidence on the Balance of Supply and Demand for Qualified Workers by S. McIntosh 169 9.1 Introduction 169 9.2 Returns to Education 169 9.3 Overeducation and Undereducation 172 9.4 Skills Shortages 176 9.5 Does Supply Determine Demand? 180 9.6 The Impact of Skills Shortages 184 9.7 Summary and Conclusions 185 PART 4. WHAT CAN EDUCATION POLICY DO? 189 Chapter Ten: Economic Evaluation of Education Initiatives by C. Emmerson, S. McNally and C. Meghir 191 10.1 Introduction: the Evaluation Problem 191 10.2 The Evaluation Problem 192 10.3 Methods of Evaluation 195 10.4 General Equilibrium and Peer Effects 202 10.5 Evaluation in Practice. I. Excellence in Cities 203 10.6 A Summary of Results 208 10.7 Evaluation in Practice. II. Education Maintenance Allowance 210 10.8 Conclusions 215 Chapter Eleven: Education Policy and the Evidence by S. Machin and A. Vignoles 217 11.1 Introduction 217 11.2 Compulsory Schooling 218 11.3 Post-Compulsory Education 221 11.4 Education and the Labour Market 223 11.5 Closing Remarks 225 References 227

Stephen Machin is Professor of Economics at the University College of London, Research Director of the Centre for Economic Performance at the London School of Economics, and Director of the Centre for the Economics of Education. Anna Vignoles is Senior Lecturer at the Institute of Education and Research Associate of the Centre for Economic Performance at the London School of Economics.

"This is a must-read for anyone interested in the economic analysis of the United Kingdom's education system. It provides a comprehensive summary of key policy issues and clarifies what the data tell us about these issues. Well-written, with helpful cross-references, the book will appeal to readers inside and outside of the UK." - Julian Betts, University of California, San Diego "The authors have taken on a formidable assignment, appealing not only to people who are familiar with the topic, but also to those who ought to know more about economics, but are not easily enticed into it." - Ted Wragg, University of Exeter"

• Preface ix List of Contributors xiii Brief Glossary xv PART 1. INTRODUCTION 1 Chapter One: Overview 3 1.1 Introduction 4 1.2 Who Gets More Education? 5 1.3 Economic Outcomes and Education 9 1.4 What Can Policy Do? 12 Chapter Two: The United Kingdom Education System in a Comparative Context by K. Hansen and A. Vignoles 13 2.1 Introduction 13 2.2 Main Features of the UK Education System 13 2.3 How Well Is the System Doing? 23 2.4 The UK Education System and the Labour Market in an International Context 29 2.5 Conclusions 34 PART 2. WHO GETS MORE EDUCATION? 37 Chapter Three: School and Teacher Effectiveness by A. Chevalier, P. Dolton and R. Levacic 39 3.1 Introduction 39 3.2 Features of the UK Schooling System 39 3.3 Incentives and Quasi-Markets 41 3.4 School and Teacher Effectiveness 45 3.5 The Impact of Resources 49 3.6 Selection and Peer Effects 53 3.7 Conclusions 55 Chapter Four: The Labour Market for Teachers by A. Chevalier and P. Dolton 57 4.1 Introduction 57 4.2 Patterns of Change in the Teacher Labour Market 58 4.3 Teacher Pay 62 4.4 Who Becomes a Teacher? 63 4.5 Feminization of Teacher Supply 65 4.6 Incentives and Teacher Rewards 66 4.7 Variations across Space and Subject 67 4.8 Non-Pecuniary Conditions 68 4.9 Conclusions 69 Chapter Five: Post-Compulsory Education and Qualification Attainment by D. Clark, G. Conlon and F. Galindo-Rueda 71 5.1 Introduction 71 5.2 Changing Patterns of Participation in Post-Compulsory Education 71 5.3 Staying On after the Compulsory School Leaving Age of 16 74 5.4 Broader Choices at 16 82 5.5 Post-16 Qualifications in the UK 86 5.6 Higher Education 90 5.7 Conclusions 95 Chapter Six: Educational Inequality and Intergenerational Mobility by J. Blanden, P. Gregg and S. Machin 99 6.1 Introduction 99 6.2 Patterns of Change in Income, Education and Education Policy 100 6.3 Measurement and Data 103 6.4 Evidence on Changes in Intergenerational Mobility and Educational Inequality 106 6.5 Conclusions 113 PART 3. ECONOMIC OUTCOMES AND EDUCATION 115 Chapter Seven: Measuring the Returns to Education by R. Blundell, L. Dearden and B. Sianesi 117 7.1 Introduction 117 7.2 Policy Relevance of the Returns to Education 118 7.3 Methodological Issues 124 7.4 Estimation Methods and Results 127 7.5 Limitations 138 7.6 Conclusions and Policy Discussion 142 7.7 Appendix: Comparing Private Rates of Return and Real Return on Debt and Equity 143 Chapter Eight: Employers' Selection Decisions: the Role of Qualifications and Tests by A. Jenkins and A. Wolf 147 8.1 Introduction 147 8.2 Why Might Employers Use Qualifications for Selection Purposes? 149 8.3 Qualifications in the Labour Market 150 8.4 What Do Employers Think Qualifications Signal? 154 8.5 Changes Over Time 159 8.6 A Heterogeneous Labour Market 162 8.7 Conclusions 166 Chapter Nine: Evidence on the Balance of Supply and Demand for Qualified Workers by S. McIntosh 169 9.1 Introduction 169 9.2 Returns to Education 169 9.3 Overeducation and Undereducation 172 9.4 Skills Shortages 176 9.5 Does Supply Determine Demand? 180 9.6 The Impact of Skills Shortages 184 9.7 Summary and Conclusions 185 PART 4. WHAT CAN EDUCATION POLICY DO? 189 Chapter Ten: Economic Evaluation of Education Initiatives by C. Emmerson, S. McNally and C. Meghir 191 10.1 Introduction: the Evaluation Problem 191 10.2 The Evaluation Problem 192 10.3 Methods of Evaluation 195 10.4 General Equilibrium and Peer Effects 202 10.5 Evaluation in Practice. I. Excellence in Cities 203 10.6 A Summary of Results 208 10.7 Evaluation in Practice. II. Education Maintenance Allowance 210 10.8 Conclusions 215 Chapter Eleven: Education Policy and the Evidence by S. Machin and A. Vignoles 217 11.1 Introduction 217 11.2 Compulsory Schooling 218 11.3 Post-Compulsory Education 221 11.4 Education and the Labour Market 223 11.5 Closing Remarks 225 References 227

Stephen Machin is Professor of Economics at the University College of London, Research Director of the Centre for Economic Performance at the London School of Economics, and Director of the Centre for the Economics of Education. Anna Vignoles is Senior Lecturer at the Institute of Education and Research Associate of the Centre for Economic Performance at the London School of Economics.

"This is a must-read for anyone interested in the economic analysis of the United Kingdom's education system. It provides a comprehensive summary of key policy issues and clarifies what the data tell us about these issues. Well-written, with helpful cross-references, the book will appeal to readers inside and outside of the UK." - Julian Betts, University of California, San Diego "The authors have taken on a formidable assignment, appealing not only to people who are familiar with the topic, but also to those who ought to know more about economics, but are not easily enticed into it." - Ted Wragg, University of Exeter"

• Preface ix List of Contributors xiii Brief Glossary xv PART 1. INTRODUCTION 1 Chapter One: Overview 3 1.1 Introduction 4 1.2 Who Gets More Education? 5 1.3 Economic Outcomes and Education 9 1.4 What Can Policy Do? 12 Chapter Two: The United Kingdom Education System in a Comparative Context by K. Hansen and A. Vignoles 13 2.1 Introduction 13 2.2 Main Features of the UK Education System 13 2.3 How Well Is the System Doing? 23 2.4 The UK Education System and the Labour Market in an International Context 29 2.5 Conclusions 34 PART 2. WHO GETS MORE EDUCATION? 37 Chapter Three: School and Teacher Effectiveness by A. Chevalier, P. Dolton and R. Levacic 39 3.1 Introduction 39 3.2 Features of the UK Schooling System 39 3.3 Incentives and Quasi-Markets 41 3.4 School and Teacher Effectiveness 45 3.5 The Impact of Resources 49 3.6 Selection and Peer Effects 53 3.7 Conclusions 55 Chapter Four: The Labour Market for Teachers by A. Chevalier and P. Dolton 57 4.1 Introduction 57 4.2 Patterns of Change in the Teacher Labour Market 58 4.3 Teacher Pay 62 4.4 Who Becomes a Teacher? 63 4.5 Feminization of Teacher Supply 65 4.6 Incentives and Teacher Rewards 66 4.7 Variations across Space and Subject 67 4.8 Non-Pecuniary Conditions 68 4.9 Conclusions 69 Chapter Five: Post-Compulsory Education and Qualification Attainment by D. Clark, G. Conlon and F. Galindo-Rueda 71 5.1 Introduction 71 5.2 Changing Patterns of Participation in Post-Compulsory Education 71 5.3 Staying On after the Compulsory School Leaving Age of 16 74 5.4 Broader Choices at 16 82 5.5 Post-16 Qualifications in the UK 86 5.6 Higher Education 90 5.7 Conclusions 95 Chapter Six: Educational Inequality and Intergenerational Mobility by J. Blanden, P. Gregg and S. Machin 99 6.1 Introduction 99 6.2 Patterns of Change in Income, Education and Education Policy 100 6.3 Measurement and Data 103 6.4 Evidence on Changes in Intergenerational Mobility and Educational Inequality 106 6.5 Conclusions 113 PART 3. ECONOMIC OUTCOMES AND EDUCATION 115 Chapter Seven: Measuring the Returns to Education by R. Blundell, L. Dearden and B. Sianesi 117 7.1 Introduction 117 7.2 Policy Relevance of the Returns to Education 118 7.3 Methodological Issues 124 7.4 Estimation Methods and Results 127 7.5 Limitations 138 7.6 Conclusions and Policy Discussion 142 7.7 Appendix: Comparing Private Rates of Return and Real Return on Debt and Equity 143 Chapter Eight: Employers' Selection Decisions: the Role of Qualifications and Tests by A. Jenkins and A. Wolf 147 8.1 Introduction 147 8.2 Why Might Employers Use Qualifications for Selection Purposes? 149 8.3 Qualifications in the Labour Market 150 8.4 What Do Employers Think Qualifications Signal? 154 8.5 Changes Over Time 159 8.6 A Heterogeneous Labour Market 162 8.7 Conclusions 166 Chapter Nine: Evidence on the Balance of Supply and Demand for Qualified Workers by S. McIntosh 169 9.1 Introduction 169 9.2 Returns to Education 169 9.3 Overeducation and Undereducation 172 9.4 Skills Shortages 176 9.5 Does Supply Determine Demand? 180 9.6 The Impact of Skills Shortages 184 9.7 Summary and Conclusions 185 PART 4. WHAT CAN EDUCATION POLICY DO? 189 Chapter Ten: Economic Evaluation of Education Initiatives by C. Emmerson, S. McNally and C. Meghir 191 10.1 Introduction: the Evaluation Problem 191 10.2 The Evaluation Problem 192 10.3 Methods of Evaluation 195 10.4 General Equilibrium and Peer Effects 202 10.5 Evaluation in Practice. I. Excellence in Cities 203 10.6 A Summary of Results 208 10.7 Evaluation in Practice. II. Education Maintenance Allowance 210 10.8 Conclusions 215 Chapter Eleven: Education Policy and the Evidence by S. Machin and A. Vignoles 217 11.1 Introduction 217 11.2 Compulsory Schooling 218 11.3 Post-Compulsory Education 221 11.4 Education and the Labour Market 223 11.5 Closing Remarks 225 References 227