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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

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Abstract

This paper develops a comprehensive framework for the quantitative analysis of the private and fiscal returns to schooling and of the effect of public policies on private incentives to invest in education. This framework is applied to 14 member states of the European Union. For each of these countries, we construct estimates of the private return to an additional year of schooling for an individual of average attainment, taking into account the effects of education on wages and employment probabilities after allowing for academic failure rates, the direct and opportunity costs of schooling, and the impact of personal taxes, social security contributions and unemployment and pension benefits on net incomes. We also construct a set of effective tax and subsidy rates that measure the effects of different public policies on the private returns to education, and measures of the fiscal returns to schooling that capture the long-term effects of a marginal increase in attainment on public finances under conditions that approximate general equilibrium.

Suggested Citation

  • Angel de la Fuente & Juan Francisco Jimeno, 2008. "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," UFAE and IAE Working Papers 737.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:737.08
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    Cited by:

    1. Miloš Krstić & José António Filipe & José Chavaglia, 2020. "Higher Education as a Determinant of the Competitiveness and Sustainable Development of an Economy," Sustainability, MDPI, vol. 12(16), pages 1-22, August.
    2. Heckman, James J. & Jacobs, Bas, 2009. "Policies to Create and Destroy Human Capital in Europe," IZA Discussion Papers 4680, IZA Network @ LISER.
    3. Michael Landesmann & Sebastian Leitner & Robert Stehrer & Terry Ward, 2009. "Skills and Industrial Competitiveness," wiiw Research Reports 356, The Vienna Institute for International Economic Studies, wiiw.
    4. Maite Blázquez Cuesta & Wiemer Salverda, 2009. "Low‐wage Employment and the Role of Education and On‐the‐job Training," LABOUR, CEIS, vol. 23(s1), pages 5-35, March.
    5. Romina Boarini & Joaquim Oliveira Martins & Hubert Strauss & Christine de la Maisonneuve & Giuseppe Nicoletti, 2008. "Investment in Tertiary Education: Main Determinants and Implications for Policy," CESifo Economic Studies, CESifo Group, vol. 54(2), pages 277-312.
    6. Fernandez, Cristina & Sevilla-Sanz, Almudena, 2006. "Social norms and household time allocation," IESE Research Papers D/648, IESE Business School.
    7. DIMIAN Gina Cristina & DIMIAN Mihai, 2011. "Main Threats To The Romanian Labour Market In The Current Context," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 69-76, December.
    8. Simeonova-Ganeva, Ralitsa, 2006. "Влияние На Човешкия Капитал Върху Икономическия Растеж (България, 1949-2005 Г.) [The Impact of Human Capital on the Economic Growth (Bulgaria, 1949-2005)]," MPRA Paper 37244, University Library of Munich, Germany.
    9. Luis J. Álvarez & Emmanuel Dhyne & Marco Hoeberichts & Claudia Kwapil & Hervé Le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmunen, 2006. "Sticky Prices in the Euro Area: A Summary of New Micro-Evidence," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 575-584, 04-05.
    10. Concetta Mendolicchio & Thomas Rhein, 2014. "The gender gap of returns on education across West European countries," International Journal of Manpower, Emerald Group Publishing Limited, vol. 35(3), pages 219-249, May.
    11. Gjipali Arsena & Kristo Suela, 2011. "Mincer Rates Of Return To Education In The Emerging Economy Of Albania," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 6(2), pages 27-36, August.
    12. Anita V. Staneva & Hany Abdel-Latif, 2016. "From Soviet to Europe: Returns to Education Puzzle in Bulgaria," LABOUR, CEIS, vol. 30(3), pages 347-367, September.
    13. Blázquez, Maite & Ramos, Jose, 2008. "Recent Investments in Human Capital and its Effect on the Chances of Escaping from Low-Paid Jobs: The Spanish Case," Working Papers in Economic Theory 2008/03, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    14. Arsena Gjipali & Suela Kristo, 2011. "Rates of Returns to Human Capital Investments in Albania," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(41), pages 3-24, September.
    15. Adela Luque, 2005. "Skill mix and technology in Spain: evidence from firm level data," Working Papers 0513, Banco de España.

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    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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