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Returns To College Over Time: Trends In Europe In The Last 15 Years. Stuck On The Puzzle

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  • Elena Crivellaro

    ()
    (University of Padova)

Abstract

While there has been intense debate in the empirical literature about the evolution of the college wage premium in the US, its evolution in Europe has been given little attention. This paper aims to investigate the evolution of the returns to higher education in 12 European countries from 1994 to 2009. In particular, it explores how does this evolution affect wage inequality and how it differs across age cohorts. The period of interest has seen higher education participation rate increasing dramatically: graduate supply considerably outstripped demand which ought to imply a fall in the premium. I use cross country variation in relative supply, demand and labour market institutions to look at their effects on the trend in the college wage gap. I address possible concerns of endogeneity of relative supply by an instrumental variable strategy. Results show a significant decline of college returns in countries with higher relative supply of skilled workers and a marked fall in college returns for recent cohorts for both men and women in all European countries. find evidence that both market and non market factors matter in explaining wage inequality. More specifically, the estimated growth in the wage gap appears negatively correlated to changes in relative supply and positively correlated with the relative demand index, in particular, in countries with higher relative supply of skilled workers, that present a stronger decline in the returns to college. Institutional constraints also matter.

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Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0146.

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Length: 56 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:pad:wpaper:0146

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  1. Arnaud Chevalier & Joanne Lindley, 2009. "Overeducation and the skills of UK graduates," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 172(2), pages 307-337.
  2. Richard Dickens & Stephen Machin & Alan Manning, 1994. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," CEP Discussion Papers dp0183, Centre for Economic Performance, LSE.
  3. Blaise Melly, 2005. "Public-private sector wage differentials in Germany: Evidence from quantile regression," Empirical Economics, Springer, vol. 30(2), pages 505-520, 09.
  4. Pfeifer, Christian, 2008. "Risk Aversion and Sorting into Public Sector Employment," IZA Discussion Papers 3503, Institute for the Study of Labor (IZA).
  5. 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.
  6. Milligan, Kevin & Moretti, Enrico & Oreopoulos, Philip, 2004. "Does education improve citizenship? Evidence from the United States and the United Kingdom," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1667-1695, August.
  7. Winfried Koeniger & Marco Leonardi & Luca Nunziata, 2007. "Labor Market Institutions and Wage Inequality," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(3), pages 340-356, April.
  8. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2003. "The Returns to Education: Microeconomics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(2), pages 115-156, 04.
  9. Martins, Pedro S. & Pereira, Pedro T., 2004. "Does education reduce wage inequality? Quantile regression evidence from 16 countries," Labour Economics, Elsevier, vol. 11(3), pages 355-371, June.
  10. Braga, Michela & Checchi, Daniele & Meschi, Elena, 2011. "Institutional Reforms and Educational Attainment in Europe: A Long Run Perspective," IZA Discussion Papers 6190, Institute for the Study of Labor (IZA).
  11. Deschenes, Olivier, 2001. "Unobserved Ability, Comparative Advantage, and the Rising Return to Education in the United States 1979-2000," University of California at Santa Barbara, Economics Working Paper Series qt10v9j8jz, Department of Economics, UC Santa Barbara.
  12. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
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