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Returns to Education in Australia

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  • Andrew Leigh

Abstract

Using data from the 2001-2005 waves of the Household, Income and Labour Dynamics in Australia survey, and taking account of existing estimates of ability bias and social returns to schooling, I estimate the economic return to various levels of education. Raising high school attainment appears to yield the highest annual benefits, with per-year gains as high as 30 percent (depending on the adjustment for ability bias). Some forms of vocational training also appear to boost earnings, with significant gains from Certificate Level III/IV qualifications (for high school dropouts only), and from Diploma and Advanced Diploma qualifications. At the university level, Bachelor degrees and postgraduate qualifications are associated with significantly higher earnings, with each year of a Bachelor degree raising annual earnings by about 15 percent. For high school, slightly less than half the gains are due to increased productivity, with the rest due to higher levels of participation. For vocational training, about one-third of the gains are from productivity, and two-thirds from greater participation. For university, most of the gains are from productivity. I find some evidence that the productivity benefits of education are higher towards the top of the distribution, but the participation effects are higher towards the bottom of the conditional earnings distribution.

Suggested Citation

  • Andrew Leigh, 2007. "Returns to Education in Australia," CEPR Discussion Papers 561, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  • Handle: RePEc:auu:dpaper:561
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    File URL: https://www.cbe.anu.edu.au/researchpapers/CEPR/DP561.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Ham, Roger & Junankar, Pramod N. (Raja) & Wells, Robert, 2009. "Antagonistic Managers, Careless Workers and Extraverted Salespeople: An Examination of Personality in Occupational Choice," IZA Discussion Papers 4193, Institute of Labor Economics (IZA).
    3. Schurer, Stefanie & de New, Sonja C. & Leung, Felix, 2015. "Do Universities Shape Their Students' Personality?," IZA Discussion Papers 8873, Institute of Labor Economics (IZA).
    4. Cain Polidano & Justin Ven & Sarah Voitchovsky, 2021. "Are Broad-Based Vouchers an Effective Way to Support Life-Long Learning? Evidence from an Australian Reform," Research in Higher Education, Springer;Association for Institutional Research, vol. 62(7), pages 998-1038, November.
    5. Cain Polidano & Chris Ryan, 2017. "What Happens to Students with Low Reading Proficiency at 15? Evidence from Australia," The Economic Record, The Economic Society of Australia, vol. 93(303), pages 600-614, December.
    6. Phil Lewis & Bilal Rafi, 2014. "Earnings of Indian Male Migrants in the Australian Labour Market," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 17(3), pages 257-275.
    7. Xiaodong Gong & Robert Breunig, 2017. "Childcare Assistance: Are Subsidies or Tax Credits Better?," Fiscal Studies, Institute for Fiscal Studies, vol. 38, pages 7-48, March.
    8. 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.
    9. Cain Polidano & Justin van de Ven & Sarah Voitchovsky, 2017. "The Power of Self-Interest: Effects of Education and Training Entitlements in Later-Life," Melbourne Institute Working Paper Series wp2017n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    10. Jacek Liwiński, 2017. "Premia płacowa z kształcenia na studiach podyplomowych," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 5, pages 105-127.
    11. Andrew Leigh, 2021. "Australian Mobility Report Cards: Which Universities Admit the Most Disadvantaged Students?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(3), pages 331-342, September.
    12. Steve Thomas, 2014. "The Rebirth of Education: Schooling Ain't Learning by Lant Pritchett Center for Global Development , Washington DC , 2013 Pp. 274. ISBN 978-1-933286-77-8," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 28(2), pages 107-110, November.
    13. Kabir Dasgupta & Alexander Plum, 2022. "Skills, Economic Crises and the Labour Market," Working Papers 2022-01, Auckland University of Technology, Department of Economics.
    14. Xiaodong Gong & Robert Breuing, 2011. "Estimating Net Child Care Price Elasticities of Partnered Women With Pre-School Children Using a Discrete Structural Labour Supply-Child Care Model," CEPR Discussion Papers 653, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    15. Seewanyana, Sarah & Kasirye, Ibrahim, 2010. "Gender differences in Uganda: the case for access to education and health services," Research Series 113612, Economic Policy Research Centre (EPRC).
    16. David Fairbrother & Renuka Mahadevan, 2016. "Do Education and Sex Matter for Intergenerational Earnings Mobility? Some Evidence from Australia," Australian Economic Papers, Wiley Blackwell, vol. 55(3), pages 212-226, September.
    17. Justin van de Ven & Cain Polidano & Sarah Voitchovsky, 2017. "The power of self-interest: Effects of subsidies for adult education and training," National Institute of Economic and Social Research (NIESR) Discussion Papers 480, National Institute of Economic and Social Research.
    18. Robert Wells & Roger Ham & P. N. (Raja) Junankar, 2016. "An examination of personality in occupational outcomes: antagonistic managers, careless workers and extraverted salespeople," Applied Economics, Taylor & Francis Journals, vol. 48(7), pages 636-651, February.
    19. Yonatan Dinku, 2021. "A longitudinal analysis of economic inactivity among Indigenous youth," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 24(1), pages 25-45.
    20. Ham, Roger & Junankar, Pramod N. (Raja) & Wells, Robert, 2009. "Occupational Choice: Personality Matters," IZA Discussion Papers 4105, Institute of Labor Economics (IZA).
    21. Damian Oliver, 2014. "Lower-level qualifications as a stepping stone for young people," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 17(1), pages 15-33.
    22. Thorsten Stromback, 2010. "Earnings, Schooling and Vocational Education and Training," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 13(3), pages 241-263.

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    More about this item

    Keywords

    Returns to education; ability bias; high school; vocational training; university;
    All these keywords.

    JEL classification:

    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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