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A Cohort Analysis of the Private Rate of Return to Higher Education in Australia

Author

Listed:
  • Anne Daly

    (University of Canberra)

  • Don Fleming

    (University of Canberra)

Abstract

There have been substantial changes in the costs and benefits of investment in tertiary education in Australia in the past twenty years. This paper compares the ex-ante private rate of return to investment in a university education based on cross section data, for cohorts studying at the time of the 1986 and 1991 Population Censuses, with the ex post results estimated from tracking a synthetic cohort over time between Censuses. Private rates of return have been estimated for both males and females. These two cohorts have achieved rates of return that are at least as high and often better than those predicted on the basis of ex ante calculations using cross-section data. This is an interesting result for individuals and policy makers evaluating past investment in higher education. The higher ex post return reflects the increasing returns to skill in the Australian labour market over the 1990s that have been documented in other studies. The paper also presents hypothetical results to illustrate the effects of the introduction of HECS and breaks in work history on the private rate of return.

Suggested Citation

  • Anne Daly & Don Fleming, 2006. "A Cohort Analysis of the Private Rate of Return to Higher Education in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 9(3), pages 257-268, September.
    • Handle: RePEc:ozl:journl:v:9:y:2006:i:3:p:257-268
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    References listed on IDEAS

    as
    1. Jeff Borland, 1999. "Earnings Inequality in Australia: Changes, Causes and Consequences," The Economic Record, The Economic Society of Australia, vol. 75(2), pages 177-202, June.
    2. Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 7, pages 307-458, Elsevier.
    3. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
    4. Ross Kelly & Philip E.T. Lewis, 2003. "The New Economy and Demand for Skills," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 6(1), pages 135-152, March.
    5. Philip Lewis & Anne Daly & Don Fleming, 2004. "Why Study Economics? The Private Rate Of Return To An Economics Degree," Economic Papers, The Economic Society of Australia, vol. 23(3), pages 234-243, September.
    6. Frank P. Larkins, 2001. "The Economic Benefits of Australian University Degrees: Bachelor and Research Higher Degrees," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 34(4), pages 403-414, December.
    7. Chapman, B & Salvage, T, 1997. "The Consequences of Recent Changes in Financing for Australian Higher Education," CEPR Discussion Papers 367, Centre for Economic Policy Research, Research School of Economics, Australian National University.
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    9. repec:bla:ecorec:v:0:y:1991:i:0:p:41-52 is not listed on IDEAS
    10. Paul W. Miller, 1982. "The Rate of Return to Education: Evidence from the 1976 Census," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 15(3), pages 23-32, November.
    11. Gary S. Becker, 1975. "Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, Second Edition," NBER Books, National Bureau of Economic Research, Inc, number beck75-1.
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    Cited by:

    1. Phil Lewis & Michael Corliss & Anne Daly, 2013. "The Rate of Return to Higher Education Over the Business Cycle," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 16(2), pages 219-236.
    2. John R. Madden, 2017. "University location and city development: the effects of Victoria University on the Western Melbourne economy," Centre of Policy Studies/IMPACT Centre Working Papers g-272, Victoria University, Centre of Policy Studies/IMPACT Centre.
    3. Phil Lewis & Anne Daly, 2020. "The Proposed Job-ready Graduate Package: a misguided arrow missing its target," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 23(2), pages 231-251.

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    More about this item

    Keywords

    Analysis of Education; Human Capital; Skills; Occupational Choice; Labor Productivity;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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