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Private Returns to Tertiary Education - How Does New Zealand Compare to the OECD?

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Author Info

  • James Zuccollo
  • Sholeh Maani
  • Bill Kaye-Blake
  • Lulu Zeng

    ()
    (NZIER
    University of Auckland Business School)

Abstract

How do private returns to tertiary education in New Zealand compare internationally? According to the latest OECD measures, the private rate of return for New Zealand is 8.9%, compared to an OECD average of 12.4%, placing New Zealand toward the bottom of the OECD ranking. The aim of this study is to better understand the reasons for that gap and determine whether the low returns could be considered as problems amenable to policy interventions. We identify a number of measurement issues with the OECD standardisation. We develop a decomposition approach and provide a series of decompositions of the New Zealand-OECD gap. Our analysis shows that about half of the gap in New Zealand’s private returns can be explained by the way OECD private tertiary returns are measured (eg, old tax rates, New Zealand’s higher employment rates, and compositional issues which have not been controlled for in the OECD analysis such as the mix of degrees and graduates in New Zealand) rather than a “real” gap. However, once those factors are taken into account there remains a gap between New Zealand and the OECD average. We identify a number of endowment, policy, and decision-related contributing factors, and identify directions for future research.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2013/13-10/twp13-10.pdf
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Bibliographic Info

Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 13/10.

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Length: 53
Date of creation: Jul 2013
Date of revision:
Handle: RePEc:nzt:nztwps:13/10

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Related research

Keywords: Private Returns; Higher Education; Earnings; OECD Index; Decomposition; Measurement Issues;

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  1. Dan A. Black & Brett J. Noel & Zheng Wang, 1999. "On-the-Job Training, Establishment Size, and Firm Size: Evidence for Economies of Scale in the Production of Human Capital," Southern Economic Journal, Southern Economic Association, vol. 66(1), pages 82-100, July.
  2. Jonas Agell, 2004. "Why are Small Firms Different? Managers' Views," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(3), pages 437-452, October.
  3. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  4. Ron Crawford & Richard Fabling & Arthur Grimes & Nick Bonner, 2007. "National R&D and Patenting: Is New Zealand an Outlier?," New Zealand Economic Papers, Taylor & Francis Journals, vol. 41(1), pages 69-90.
  5. Paul Schreyer, 2007. "International Comparisons of Levels of Capital Input and Multi-Factor Productivity," German Economic Review, Verein für Socialpolitik, vol. 8, pages 237-254, 05.
  6. Trinh Le & John Gibson & Les Oxley, 2006. "A Forward-Looking Measure Of The Stock Of Human Capital In New Zealand," Manchester School, University of Manchester, vol. 74(5), pages 593-609, 09.
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