Sergio Urzúa

Assistant Professor of Economics
Faculty Fellow, Institute for Policy Research
Northwestern University
PhD, University of Chicago, 2007
s-urzua@northwestern.edu
Curriculum Vitae

Sergio Urzúa's research has focused on the role of cognitive and noncognitive abilities, and uncertainty as determinants of schooling decisions, labor market outcomes and social behavior. His research in econometrics is mainly concerned with the estimation of selection models with unobserved heterogeneity.

Current Research

Cognitive Ability and Personal Achievement. In recent research, Urzúa and economists James J. Heckman, the 2000 Nobel laureate in economics, and Jora Stixrud of the University of Chicago challenge the view that cognitive ability, as measured on tests, fully explains personal achievement. They find evidence that noncognitive skills such as motivation, persistence, and self-esteem have as much as influence on outcomes for schooling, wages, and employment as cognitive ability.

The Importance of Early Cognitive, Noncognitive and Health Endowments. Urzúa and his colleagues use U.K. and U.S. data to study the role of early endowments (cognitive, personality and health) on labor market, social behavior, and health outcomes. The study represents a departure from the previous economic literature since it considers the role of early health status as a potential determinant of variables measured during adulthood. Urzúa is working on the project with Orla Doyle and Kevin Denny of the Geary Institute at University College Dublin and James Heckman of the University of Chicago.

Measuring the Impact of Financial Intermediation on Occupational Choices and Income. Urzúa and Robert Townsend of the University of Chicago analyze the link between contract theory models of financial intermediation and econometric policy evaluation. They are studying a variety of structural-choice models, in which financial intermediation has an impact on productivity through the alleviation of credit constraints in occupational choice and/or an improved allocation of risk. They then interweave the analysis of these models with econometric information on natural experiments to assess the impact of policy variation and financial institutions on incomes, occupations, risk sharing, and other variables. In bringing these two strands together, the researchers discuss how to determine which econometric and policy evaluation techniques are most appropriate by taking into account the underlying model, assumptions, and data.

Disentangling the Role of Nature and Nurture in Explaining Inequality. Urzúa and Julio Guzman of the University of Chicago develop a structural model of income inequality that considers how parents' human capital and an individual's abilities directly and indirectly affect schooling decisions and labor market outcomes. The researchers then use data from Chile to populate this model and analyze how an individual's inherited characteristics (circumstances) and endogenous decisions (opportunities) can explain income inequality. Preliminary results indicate that both family background and individual abilities play an important role in explaining income inequality. Additionally, inadequate levels of education appear as an important force in explaining the country's high levels of inequality.

Testing the Correlated Random Coefficient Model. The recent empirical literature on instrumental variables (IV) features correlated random coefficient models in which agents sort into treatment on the basis of gains as well as baseline pretreatment levels. Sorting on gains introduces greatly complicates interpreting IV estimates. This project examines the hypothesis that agents do not sort into treatment based on gains. Urzúa with James Heckman and Daniel Schmierer of the University of Chicago analyze tests from the existing literature on specification testing and develop new tests to gauge the empirical relevance of correlated random coefficients to see if the additional complications associated with these models are required. The power of the tests is low in samples of the size usually encountered in microeconomics.

Selected Publications

Urzúa, S. Racial labor market gaps: The role of abilities and schooling choices.
Journal of Human Resources, forthcoming.

Urzúa, S., with A. Basu, J. Heckman and S. Navarro. The use of instrumental variables in the presence of heterogeneity and self-selection: An application in breast cancer patients. Health Economics, forthcoming.

Urzúa, S., with J. Heckman and E. Vytlacil. 2006. Understanding instrumental variables in models with essential heterogeneity. Review of Economics and Statistics 88(3): 389-432.

Urzúa, S., with J. Heckman and J. Stixrud. 2006. The effects of cognitive and noncognitive abilities on labor market outcomes and social behavior. Journal of Labor Economics 24(3): 411-82.