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Estimating the Rate of Return to Education using Microsimulation

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  • Cathal O'Donoghue

    (University of Cambridge)

Abstract

This paper attempts to use microsimulation methods to compare returns to education in four European countries, Germany, Ireland, Italy and the United Kingdom. This paper broadens the type of measure used to measure the return to education to include interactions with public taxtransfer systems and to consider the effect of differential employment rates on education. Mincer style wage equations are estimated for each country in order to model the return to education of gross earnings. These estimates are then incorporated into a microsimulation model to estimate social, private and fiscal returns to education in the countries. Both point estimates and a distribution of the rates of return are described.

Suggested Citation

  • Cathal O'Donoghue, 1999. "Estimating the Rate of Return to Education using Microsimulation," The Economic and Social Review, Economic and Social Studies, vol. 30(3), pages 249-265.
  • Handle: RePEc:eso:journl:v:30:y:1999:i:3:p:249-265
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    File URL: http://www.esr.ie/vol30_3/3_O%27Donoghue.pdf
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    References listed on IDEAS

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    1. Bourguignon F & O'donoghue C & Sastre-descals J & Spadaro A & Utili F, 1998. "Technical Description of Eur3: A Prototype European Tax-Benefit Model," Microsimulation Unit Research Notes MU/RN/25, Microsimulation Unit at the Institute for Social and Economic Research.
    2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    3. Robert H. Haveman & Barbara L. Wolfe, 1984. "Schooling and Economic Well-Being: The Role of Nonmarket Effects," Journal of Human Resources, University of Wisconsin Press, vol. 19(3), pages 377-407.
    4. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    5. Callan, Tim & Harmon, Colm, 1999. "The economic return to schooling in Ireland," Labour Economics, Elsevier, vol. 6(4), pages 543-550, November.
    6. Sutherland, H., 1995. "Static Microsimulation Models in Europe: A Survey," Cambridge Working Papers in Economics 9523, Faculty of Economics, University of Cambridge.
    7. Andrew Glyn & Wiemer Salverda, 1999. "Employment Inequalities," Economics Working Paper Archive wp_293, Levy Economics Institute.
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    Cited by:

    1. Angel de la Fuente & Juan Francisco Jimeno, 2004. "The private and fiscal returns to schooling and the effect of public policies on private incentives to invest in education: a general framework and some results for the EU," Working Papers 152, Barcelona Graduate School of Economics.

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