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Estimating the Rate of Return to Education using Microsimulation

Author

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  • Cathal O'Donoghue

    (University of Cambridge)

Abstract

This paper attempts to use microsimulation methods to compare returns to education in four European countries, Germany, Ireland, Italy and the United Kingdom. This paper broadens the type of measure used to measure the return to education to include interactions with public taxtransfer systems and to consider the effect of differential employment rates on education. Mincer style wage equations are estimated for each country in order to model the return to education of gross earnings. These estimates are then incorporated into a microsimulation model to estimate social, private and fiscal returns to education in the countries. Both point estimates and a distribution of the rates of return are described.

Suggested Citation

  • Cathal O'Donoghue, 1999. "Estimating the Rate of Return to Education using Microsimulation," The Economic and Social Review, Economic and Social Studies, vol. 30(3), pages 249-265.
    • Handle: RePEc:eso:journl:v:30:y:1999:i:3:p:249-265
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    File URL: http://www.esr.ie/vol30_3/3_O%27Donoghue.pdf
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    References listed on IDEAS

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    1. Bourguignon F & O'donoghue C & Sastre-descals J & Spadaro A & Utili F, 1998. "Technical Description of Eur3: A Prototype European Tax-Benefit Model," Microsimulation Unit Research Notes MU/RN/25, Microsimulation Unit at the Institute for Social and Economic Research.
    2. Robert H. Haveman & Barbara L. Wolfe, 1984. "Schooling and Economic Well-Being: The Role of Nonmarket Effects," Journal of Human Resources, University of Wisconsin Press, vol. 19(3), pages 377-407.
    3. Callan, Tim & Harmon, Colm, 1999. "The economic return to schooling in Ireland," Labour Economics, Elsevier, vol. 6(4), pages 543-550, November.
    4. Andrew Glyn & Wiemer Salverda, 1999. "Employment Inequalities," Economics Working Paper Archive wp_293, Levy Economics Institute.
    5. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    6. Bourguignon, F. & O'Donoghue, C. & Sastre-Descals, J. & Spadara, A. & Utili, F., 1997. "Eur3: A Prototype European Tax-Benefit Model," Cambridge Working Papers in Economics 9723, Faculty of Economics, University of Cambridge.
    7. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    8. Sutherland, H., 1995. "Static Microsimulation Models in Europe: A Survey," Cambridge Working Papers in Economics 9523, Faculty of Economics, University of Cambridge.
    9. Wilhelm Lorenz & Joachim Wagner & Karel van den Bosch, 1990. "A Note on the Returns to Human Capital in the Eighties: Evidence from Twelve Countries," LIS Working papers 54, LIS Cross-National Data Center in Luxembourg.
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    Cited by:

    1. Angel de la Fuente & Juan Francisco Jimeno, 2004. "The private and fiscal returns to schooling and the effect of public policies on private incentives to invest in education: a general framework and some results for the EU," UFAE and IAE Working Papers 635.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).

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