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Returns to university education; evidence from an institutional reform

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  • Dinand Webbink

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    Abstract

    In 1982, duration of university education in the Netherlands decreased from five to four years. This institutional reform is exploited for estimating the causal effect of one year of university education on wages in 1997. Wages of employees who enrolled just before or after the reform are compared using data from the Dutch Wage Structure Survey of 1997. We find that the fifth year of university education increased wages with 7 to 9 percent. This wage differential is found for employees enrolling four years before or after the reform. Confounding factors like time-effects, typical age-effects or ability-bias do not seem to bias the main results. The findings suggest that there is scope for increasing private contributions of students. Moreover, the reform may have harmed total welfare. Alternative policies of sticking to five-year duration and increasing private contributions for higher education could have given a more favourable outcome.

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    Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 34.

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    Date of creation: Jul 2004
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    Handle: RePEc:cpb:discus:34

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    1. Adriaan Kalwij, 2000. "Estimating the economic return to schooling on the basis of panel data," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 32(1), pages 61-71.
    2. Edwin Leuven & Hessel Oosterbeek, 2002. "Evaluating the effect of tax deductions on training," Labor and Demography, EconWPA 0205001, EconWPA.
    3. Ashenfelter, O. & Harmon, C. & Oosterbeek, H., 1999. "A Review of Estimates of the Schooling/ Earnings Relationship, with tests for Publication Bias," Papers, College Dublin, Department of Political Economy- 99/20, College Dublin, Department of Political Economy-.
    4. Levin, Jesse & Plug, Erik J. S., 1999. "Instrumenting education and the returns to schooling in the Netherlands," Labour Economics, Elsevier, Elsevier, vol. 6(4), pages 521-534, November.
    5. Costas Megir & Martin Palme, 2001. "The effect of a social experiment in education," CEE Discussion Papers, Centre for the Economics of Education, LSE 0014, Centre for the Economics of Education, LSE.
    6. Angrist, Joshua D & Krueger, Alan B, 1991. "Does Compulsory School Attendance Affect Schooling and Earnings?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(4), pages 979-1014, November.
    7. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, American Economic Association, vol. 85(5), pages 1278-86, December.
    8. Aakvik, Arild & Salvanes, Kjell G & Vaage, Kjell, 2003. "Measuring Heterogeneity in the Returns to Education in Norway Using Educational Reforms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4088, C.E.P.R. Discussion Papers.
    9. Wilbert van der Klaauw, 2002. "Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach," 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. 43(4), pages 1249-1287, November.
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    Cited by:
    1. Nohora Y. Forero Ramírez & Manuel Ramírez Gómez, 2008. "Determinantes de los ingresos laborales de los graduados universitarios durante el período 2001-2004," DOCUMENTOS DE TRABAJO, UNIVERSIDAD DEL ROSARIO 004591, UNIVERSIDAD DEL ROSARIO.
    2. Stefan Groot & Henri de Groot & Martijn Smit, 2011. "Regional wage differences in the Netherlands: Micro-evidence on agglomeration externalities," CPB Discussion Paper, CPB Netherlands Bureau for Economic Policy Analysis 184, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Salas-Velasco, Manuel, 2009. "Beyond lectures and tutorials: Formal on-the-job training received by young European university graduates," Research in Economics, Elsevier, Elsevier, vol. 63(3), pages 200-211, September.
    4. Nohora Y. Forero Ramírez & Manuel Ramírez Gómez, 2008. "Determinantes de los ingresos laborales de los graduados universitarios en Colombia: un análisis a partir de la Herramienta de Seguimiento a Graduados," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO.

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