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Mind the Gap? Estimating the Effects of Postponing Higher Education

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  • Bertil Holmlund
  • Qian Liu
  • Oskar Nordström Skans

Abstract

This paper estimates the effects on earnings of “gap years” between high school and university enrollment. The effect is estimated by means of standard earnings functions augmented to account for gap years and a rich set of control variables using administrative Swedish data. We find that postponement of higher education is associated with a persistent and non-trivial earnings penalty. The main source of the persistent penalty appears to be the loss of work experience after studies. The reduction of lifetime earnings associated with two years postponement of higher education amounts to 40-50 percent of annual earnings at age 40.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-08/cesifo1_wp1792.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1792.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1792

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Keywords: timing of education; schooling interruptions; returns to work experience;

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References

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  1. Comay, Yochanan & Melnik, A & Pollatschek, M A, 1973. "The Option Value of Education and the Optimal Path for Investment in Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 421-35, June.
  2. Mincer, Jacob & Polachek, Solomon, 1974. "Family Investment in Human Capital: Earnings of Women," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(2), pages S76-S108, Part II, .
  3. Reuben Gronau, 1982. "Sex-Related Wage Differentials and Women's Interrupted Labor Careers--The Chicken or the Egg," NBER Working Papers 1002, National Bureau of Economic Research, Inc.
  4. Altonji, Joseph G, 1993. "The Demand for and Return to Education When Education Outcomes Are Uncertain," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 11(1), pages 48-83, January.
  5. Heckman, James J. & Lochner, Lance John & Todd, Petra E., 2003. "Fifty Years of Mincer Earnings Regressions," IZA Discussion Papers 775, Institute for the Study of Labor (IZA).
  6. Griliches, Zvi, 1980. " Schooling Interruption, Work While in School and the Returns from Schooling," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 82(2), pages 291-303.
  7. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2005. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," NBER Working Papers 11544, National Bureau of Economic Research, Inc.
  8. Audrey Light, 1995. "The Effects of Interrupted Schooling on Wages," Journal of Human Resources, University of Wisconsin Press, vol. 30(3), pages 472-502.
  9. Albrecht, James W. & Edin, Per-Anders & Sundström, Marianne & Vroman, Susan B., 1996. "Career Interruptions and Subsequent Earnings: A Reexamination Using Swedish Data," Working Paper Series, Uppsala University, Department of Economics 1996:23, Uppsala University, Department of Economics.
  10. Jacob Mincer & Solomon Polacheck, 1974. "Family Investments in Human Capital: Earnings of Women," NBER Chapters, National Bureau of Economic Research, Inc, in: Economics of the Family: Marriage, Children, and Human Capital, pages 397-431 National Bureau of Economic Research, Inc.
  11. V. Joseph Hotz & Lixin Colin Xu & Marta Tienda & Avner Ahituv, 2002. "Are There Returns To The Wages Of Young Men From Working While In School?," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 221-236, May.
  12. Nordström Skans, Oskar & Liljeberg, Linus, 2005. "Causal effects of subsidized career breaks," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2005:17, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  13. Blinder, Alan S & Weiss, Yoram, 1976. "Human Capital and Labor Supply: A Synthesis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(3), pages 449-72, June.
  14. Monks, James, 1997. "The impact of college timing on earnings," Economics of Education Review, Elsevier, Elsevier, vol. 16(4), pages 419-423, October.
  15. Light, Audrey & Ureta, Manuelita, 1995. "Early-Career Work Experience and Gender Wage Differentials," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 13(1), pages 121-54, January.
  16. Jacob Mincer & Haim Ofek, 1982. "Interrupted Work Careers: Depreciation and Restoration of Human Capital," Journal of Human Resources, University of Wisconsin Press, vol. 17(1), pages 3-24.
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Cited by:
  1. Annette BERGEMANN & Gerard J. VAN DEN BERG, 2008. "Active Labor Market Policy Effects for Women in Europe – A Survey," Annales d'Economie et de Statistique, ENSAE, issue 91-92, pages 385-408.
  2. Lundin, Daniela & Mörk, Eva & Öckert, Björn, 2007. "Do reduced child care prices make parents work more?," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2007:2, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  3. de Jong, Philip & Lindeboom, Maarten & van der Klaauw, Bas, 2006. "Screening Disability Insurance Applications," IZA Discussion Papers 1981, Institute for the Study of Labor (IZA).
  4. Hällsten, Martin, 2012. "Is it ever too late to study? The economic returns on late tertiary degrees in Sweden," Economics of Education Review, Elsevier, Elsevier, vol. 31(1), pages 179-194.
  5. Sören Blomquist & Vidar Christiansen & Luca Micheletto, 2008. "Public Provision of Private Goods and Nondistortionary Marginal Tax Rates," CESifo Working Paper Series 2303, CESifo Group Munich.
  6. Pekkarinen, Tuomas & Pekkala, Sari & Uusitalo, Roope, 2006. "Educational policy and intergenerational income mobility: evidence from the Finnish comprehensive school reform," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2006:13, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  7. Ågren, Martin, 2006. "Prospect Theory and Higher Moments," Working Paper Series, Uppsala University, Department of Economics 2006:24, Uppsala University, Department of Economics.
  8. Hallberg, Daniel & Lindh, Thomas & Zamac, Jovan, 2011. "Study achievement for students with kids," Working Paper Series, Center for Labor Studies, Uppsala University, Department of Economics 2011:16, Uppsala University, Department of Economics.
  9. Maria K. Humlum & Jannie H.G. Kristoffersen & Rune Vejlin, 2012. "Timing of College Enrollment and Family Formation Decisions," Economics Working Papers, School of Economics and Management, University of Aarhus 2012-01, School of Economics and Management, University of Aarhus.
  10. Forslund, Anders, 2009. "Labour supply incentives, income support systems and taxes in Sweden," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2009:30, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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