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

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Author Info

  • Walker, Ian

    ()
    (Lancaster University)

  • Zhu, Yu

    ()
    (University of Kent)

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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Bibliographic 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:
Publication status: published in: Scandinavian Journal of Economics, 2008, 110 (4), 695-709
Handle: RePEc:iza:izadps:dp1627

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Keywords: college premium; higher education; human capital;

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References

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  1. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2003. "Does education raise productivity, or just reflect it?," Working Papers, School Of Economics, University College Dublin 200304, School Of Economics, University College Dublin.
  2. Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 635-66, October.
  3. Harmon, C & Ian Walker, 1995. "Estimates of the economic return to schooling for the UK," IFS Working Papers, Institute for Fiscal Studies W95/12, Institute for Fiscal Studies.
  4. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2004. "Evaluating the impact of education on earnings in the UK: models, methods and results from the NCDS," LSE Research Online Documents on Economics 19451, London School of Economics and Political Science, LSE Library.
  5. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain The Rising Return To College For Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(2), pages 705-746, May.
  6. David Greenaway & Michelle Haynes, 2003. "Funding Higher Education in The UK: The Role of Fees and Loans," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 113(485), pages F150-F166, February.
  7. McGuinness, Seamus & Bennett, Jessica, 2007. "Overeducation in the graduate labour market: A quantile regression approach," Economics of Education Review, Elsevier, vol. 26(5), pages 521-531, October.
  8. Steven Mcintosh, 2006. "Further Analysis of the Returns to Academic and Vocational Qualifications," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(2), pages 225-251, 04.
  9. Nigel C. O’Leary & Peter J. Sloane, 2005. "The Return to a University Education in Great Britain," National Institute Economic Review, National Institute of Economic and Social Research, vol. 193(1), pages 75-89, July.
  10. 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 12 Feb 2014.
  11. Taber, Christopher R, 2001. "The Rising College Premium in the Eighties: Return to College or Return to Unobserved Ability?," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 665-91, July.
  12. Dearden, Lorraine, et al, 2002. "The Returns to Academic and Vocational Qualifications in Britain," Bulletin of Economic Research, Wiley Blackwell, vol. 54(3), pages 249-74, July.
  13. 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).
  14. 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.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Is the graduate premium falling?
    by chris dillow in Stumbling and Mumbling on 2009-01-28 14:23:06
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Michael Gebel & Friedhelm Pfeiffer, 2010. "Educational Expansion and Its Heterogeneous Returns for Wage Workers," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 130(1), pages 19-42.
  2. 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).
  3. Heshmati, Almas, 2007. "Labor Market Policy Options of the Kurdistan Regional Government," IZA Discussion Papers 3247, Institute for the Study of Labor (IZA).
  4. Steve Machin & Anna Vignoles, 2005. "Education Policy in the UK," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 3(4), pages 64-74, 01.
  5. Wang, Le, 2012. "Economic transition and college premium in urban China," China Economic Review, Elsevier, vol. 23(2), pages 238-252.
  6. Longhi, Simonetta & Brynin, Malcolm, 2007. "Job competition amongst university graduates," ISER Working Paper Series 2007-18, Institute for Social and Economic Research.
  7. Charley Greenwood & Andrew Jenkins & Anna Vignoles, 2007. "The Returns to Qualifications in England: Updating the Evidence Base on Level 2 and Level 3 Vocational Qualifications," CEE Discussion Papers 0089, Centre for the Economics of Education, LSE.
  8. Francis Green & Yu Zhu, 2010. "Overqualification, job dissatisfaction, and increasing dispersion in the returns to graduate education," Oxford Economic Papers, Oxford University Press, vol. 62(4), pages 740-763, October.

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