Earnings returns to the British educational expansion

Author: Paul Devereux, Wen Fan
Institution: University College Dublin
Type of case study: Research

About the research

Since the 1980s Britain has seen a massive expansion in higher education. More and more students are not only enrolling, they're also attaining higher degrees. Policy makers and public debate usually point out that increased education allows for greater earnings once students enter employment over their lifetime. Researchers from University College Dublin have been investigating the economic effects of this expansion in Britain.

Treating this expansion as an exogenous increase, they investigated how incomes changed after expanded education. They discovered that men on average gained another year of education, which resulted in an eight per cent increase in wages. They discovered a higher increase in education in women, along with a similar increase in their wages.

The researchers were especially interested in the cohorts born between 1970 and 1975 who would have had access to this expansion and found that there was a sizeable gain for those people born late enough to take advantage of these expanded education opportunities. The results imply that education expansion was effective in raising both educational and subsequent earning levels.

Methodology

This research used quarterly data from the Labour Force Survey from the first quarter of 1997 through to third quarter of 2009 with cohorts born between 1958 and 1982 and aged between 25 and 50. Variables extracted from the survey include the age students left continuous education and measures of specific qualifications gained (such as A-Levels) and whether they have a university degree. The analysis used ordinary least squares and two stage least squares.

Publications

Devereux, P.J. and Fan, W. (2011) ‘Earnings returns to the British educational expansion’, Economics of Education Review 30(6), pp. 1153-1166. doi: 10.1016/j.econedurev.2011.03.004 Retrieved 2 September 2013 from http://www.sciencedirect.com/science/article/pii/S0272775711000471#

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