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Risks and Returns to Educational Fields: A Financial Asset Approach to Vocational and Academic Education

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  • Daniela Glocker
  • Johanna Storck

Abstract

Applying a financial assets approach, we analyze the returns and earnings risk of investments into different types of human capital. Even though the returns from investing in human capital are extensively studied, little is known about the properties of the returns to different types of human capital within a given educational path. Using information from the German Micro Census, we estimate the risk and returns to around 70 fields of education and differentiate between vocational and academic education. We identify fields of education that are efficient investment goods, i.e. high returns at a given level of risk, and fields that are chosen for other (non-monetary) reasons. Furthermore, we rank fields of education by their return per unit of risk and find that university education is not always superior to other educational paths.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.407561.de/dp1240.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1240.

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Length: 368 p.
Date of creation: 2012
Date of revision:
Handle: RePEc:diw:diwwpp:dp1240

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Keywords: Educational choice; human capital investment; returns to schooling; mean-variance analysis;

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References

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  1. Basit Zafar, 2009. "College major choice and the gender gap," Staff Reports 364, Federal Reserve Bank of New York.
  2. Charlotte Christiansen & Juanna Schröter Joensen, 2006. "The Risk-Return Trade-Off in Human Capital Investment," Economics Working Papers 2006-02, School of Economics and Management, University of Aarhus.
  3. Ignacio Palacios-Huerta, 2001. "An Empirical Analysis of the Risk Properties of Human Capital Returns," Working Papers 2001-10, Brown University, Department of Economics.
  4. Frank Fossen & Daniela Glocker, 2011. "Expected future earnings, taxation, and university enrollment," International Tax and Public Finance, Springer, vol. 18(6), pages 688-723, December.
  5. Christian Belzil & Marco Leonardi, 2006. "Can Risk Aversion Explain Schooling Attainments? Evidence From Italy," Post-Print halshs-00142551, HAL.
  6. Brahim Boudarbat & Claude Montmarquette, 2009. "Choice of fields of study of university Canadian graduates: the role of gender and their parents' education," Education Economics, Taylor & Francis Journals, vol. 17(2), pages 185-213.
  7. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  8. Ammermüller, Andreas & Weber, Andrea Maria, 2005. "Educational Attainment and Returns to Education in Germany: An Analysis by Subject of Degree, Gender and Region," ZEW Discussion Papers 05-17, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Kelly, Elish & O'Connell, Philip J. & Smyth, Emer, 2010. "The economic returns to field of study and competencies among higher education graduates in Ireland," Economics of Education Review, Elsevier, vol. 29(4), pages 650-657, August.
  10. Arcidiacono, Peter, 2002. "Ability Sorting and the Returns to College Major," Working Papers 02-26, Duke University, Department of Economics.
  11. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, October.
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