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The College Wage Premium, Overeducation, and the Expansion of Higher Education in the UK

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Author Info
Ian Walker () (University of Warwick, Institute for Fiscal Studies and IZA Bonn)
Yu Zhu (University of Kent and Centre for the Economics of Education)

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Abstract

This paper provides findings from the UK Labour Force Surveys from 1996 to 2003 on the financial private returns to a degree - the "college premium". The data covers a decade when the university participation rate doubled - yet we find no significant evidence that the mean return to a degree dropped in response to this large increase in the flow of graduates. However, we do find quite large falls in returns when we compare the cohorts that went to university before and after the recent rapid expansion of HE. The evidence is consistent with the notion that new graduates are a close substitute for recent graduates but poor substitutes for older graduates. There appears to have been a very recent increase in the number of graduates getting "non-graduate" jobs but, conditional on getting a graduate job the returns seem stable. Our results are consistent across almost all degree subjects - the exception being maths and engineering where we find that for men, and especially for women, there is a large increase in the proportion with maths and engineering degrees getting graduate jobs and that, conditional on this, the return is rising.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1627.

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Length: 32 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1627

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Related research
Keywords: human capital; higher education; college premium;

Other versions of this item:

Find related papers by JEL classification:
I20 - Health, Education, and Welfare - - Education - - - General
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Colm Harmon; & Ian Walker, 1995. "Estimates of Economic Return to Schooling in the UK," Economics, Finance and Accounting Department Working Paper Series n540195, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  2. Seamus McGuinness & Jessica Doyle, 2004. "Overeducation and the Graduate Labour Market: A Quantile Regression Approach," Working Papers ERINI 1, Economic Research Institute of Northern Ireland. [Downloadable!]
    Other versions:
  3. David Greenaway & Michelle Haynes, 2003. "Funding Higher Education in The UK: The Role of Fees and Loans," Economic Journal, Royal Economic Society, vol. 113(485), pages F150-F166, February. [Downloadable!] (restricted)
  4. Sloane, Peter J. & O'Leary, Nigel C., 2004. "The Return to a University Education in Great Britain," IZA Discussion Papers 1199, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Steven McIntosh, 2004. "Further Analysis of the Returns to Academic and Vocational Qualifications," CEE Discussion Papers 0035, Centre for the Economics of Education, LSE. [Downloadable!]
    Other versions:
  6. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2004. "Evaluating the Impact of Education on Earnings in the UK: Models, Methods and Results from the NCDS," CEE Discussion Papers 0047, Centre for the Economics of Education, LSE. [Downloadable!]
    Other versions:
  7. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. O'Leary, Nigel C. & Sloane, Peter J., 2005. "The Changing Wage Return to an Undergraduate Education," IZA Discussion Papers 1549, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2004. "Does Education Raise Productivity, or Just Reflect it?," Economic Journal, Royal Economic Society, vol. 114(499), pages F499-F517, November. [Downloadable!] (restricted)
    Other versions:
  10. Harmon, C & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers W95/12, Institute for Fiscal Studies.
  11. Taber, Christopher R, 2001. "The Rising College Premium in the Eighties: Return to College or Return to Unobserved Ability?," Review of Economic Studies, Blackwell Publishing, vol. 68(3), pages 665-91, July.
  12. Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Blackwell Publishing, vol. 67(4), pages 635-66, October.
    Other versions:
  13. Edwin Leuven & Barbara Sianesi, 2003. "PSMATCH2: Stata module to perform full Mahalanobis and propensity score matching, common support graphing, and covariate imbalance testing," Statistical Software Components S432001, Boston College Department of Economics, revised 02 May 2009. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Steve Machin & Anna Vignoles, 2005. "Education Policy in the UK," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 3(4), pages 64-74, 01. [Downloadable!]
  2. repec:ese:iserwp: is not listed on IDEAS
  3. Francis Green & Yu Zhu, 2008. "Overqualification, Job Dissatisfaction, and Increasing Dispersion in the Returns to Graduate Education," Studies in Economics 0803, Department of Economics, University of Kent. [Downloadable!]
  4. Almas Heshmati, 2007. "Labor Market Policy Options of the Kurdistan Regional Government," IZA Discussion Papers 3247, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Gebel, Michael & Pfeiffer, Friedhelm, 2007. "Educational expansion and its heterogeneous returns for wage workers," ZEW Discussion Papers 07-010, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  6. Grazier, Suzanne & O'Leary, Nigel C. & Sloane, Peter J., 2008. "Graduate Employment in the UK: An Application of the Gottschalk-Hansen Model," IZA Discussion Papers 3618, Institute for the Study of Labor (IZA). [Downloadable!]
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