IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/66056.html
   My bibliography  Save this paper

Graduate returns, degree class premia and higher education expansion in the UK

Author

Listed:
  • Naylor, Robin
  • Smith, Jeremy
  • Telhaj, Shqiponja

Abstract

We investigate the extent to which graduate returns vary according to the class of degree achieved by UK university students and examine changes over time in estimated degree class premia. Using a variety of complementary datasets for individuals born in Britain around 1970 and aged between 30 and 40, we estimate an hourly wage premium for a ‘good’ (relative to a ‘lower’) class of degree of 7% to 9%, implying a wide spread around the average graduate premium. We also estimate the premium for a good relative to a lower degree for different cohorts (those born between the mid-1960s and early-1980s) and find evidence that the premium for a good degree has risen over time as the proportions of cohorts participating in higher education have increased.

Suggested Citation

  • Naylor, Robin & Smith, Jeremy & Telhaj, Shqiponja, 2015. "Graduate returns, degree class premia and higher education expansion in the UK," LSE Research Online Documents on Economics 66056, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:66056
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/66056/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Patrick J. Bayer & Peter Arcidiacono & Aurel Hizmo, 2010. "Web Appendix: Beyond Signaling and Human Capital: Education and the Revelation of Ability," Working Papers 10-52, Duke University, Department of Economics.
    2. Chay, Kenneth Y. & Lee, David S., 2000. "Changes in relative wages in the 1980s Returns to observed and unobserved skills and black-white wage differentials," Journal of Econometrics, Elsevier, vol. 99(1), pages 1-38, November.
    3. Dolton, Peter J & Makepeace, G H, 1990. "The Earnings of Economics Graduates," Economic Journal, Royal Economic Society, vol. 100(399), pages 237-250, March.
    4. Feng, Andy & Graetz, Georg, 2017. "A question of degree: The effects of degree class on labor market outcomes," Economics of Education Review, Elsevier, vol. 61(C), pages 140-161.
    5. Walker, Ian & Zhu, Yu, 2011. "Differences by degree: Evidence of the net financial rates of return to undergraduate study for England and Wales," Economics of Education Review, Elsevier, vol. 30(6), pages 1177-1186.
    6. Blundell, Richard, et al, 2000. "The Returns to Higher Education in Britain: Evidence from a British Cohort," Economic Journal, Royal Economic Society, vol. 110(461), pages 82-99, February.
    7. Peter Arcidiacono & Patrick Bayer & Aurel Hizmo, 2010. "Beyond Signaling and Human Capital: Education and the Revelation of Ability," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 76-104, October.
    8. Claire Crawford, 2014. "Socio-economic differences in university outcomes in the UK: drop-out, degree completion and degree class," IFS Working Papers W14/31, Institute for Fiscal Studies.
    9. Jo Blanden & Paul Gregg & Lindsey Macmillan, 2007. "Accounting for Intergenerational Income Persistence: Noncognitive Skills, Ability and Education," Economic Journal, Royal Economic Society, vol. 117(519), pages 43-60, March.
    10. Henry S. Farber & Robert Gibbons, 1996. "Learning and Wage Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1007-1047.
    11. Christopher R. Taber, 2001. "The Rising College Premium in the Eighties: Return to College or Return to Unobserved Ability?," Review of Economic Studies, Oxford University Press, vol. 68(3), pages 665-691.
    12. Di Pietro, Giorgio, 2010. "The Impact of Degree Class on the First Destinations of Graduates: A Regression Discontinuity Approach," IZA Discussion Papers 4836, Institute of Labor Economics (IZA).
    13. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
    14. H. Battu & C. R. Belfield & P. J. Sloane, 1999. "Overeducation Among Graduates: a cohort view," Education Economics, Taylor & Francis Journals, vol. 7(1), pages 21-38.
    15. Blackburn, McKinley L & Neumark, David, 1993. "Omitted-Ability Bias and the Increase in the Return to Schooling," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 521-544, July.
    16. Joseph G. Altonji & Charles R. Pierret, 2001. "Employer Learning and Statistical Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 313-350.
    17. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
    18. Richard Blundell & Lorraine Dearden & Barbara Sianesi, 2005. "Evaluating the effect of education on earnings: models, methods and results from the National Child Development Survey," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(3), pages 473-512, July.
    19. Jeremy Smith & Robin Naylor, 2001. "Determinants of Degree Performance in UK Universities: A Statistical Analysis of the 1993 Student Cohort," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(1), pages 29-60, February.
    20. Robert Moffitt, 2007. "Estimating Marginal Returns to Higher Education in the UK," NBER Working Papers 13534, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richard Blundell & David A. Green & Wenchao (Michelle) Jin, 2016. "The UK wage premium puzzle: how did a large increase in university graduates leave the education premium unchanged?," IFS Working Papers W16/01, Institute for Fiscal Studies.
    2. Judith M. Delaney & Paul J. Devereux, 2020. "How Gender and Prior Disadvantage Predict Performance in College," The Economic and Social Review, Economic and Social Studies, vol. 51(2), pages 189-239.
    3. George Agiomirgianakis & Theodore Lianos & Nicholas Tsounis, 2019. "Returns to Investment in Distance Learning: the Case of Greece," International Business Research, Canadian Center of Science and Education, vol. 12(3), pages 94-100, March.
    4. Elif Kara & Mirco Tonin & Michael Vlassopoulos, 2020. "Class Size Effects in Higher Education: Differences Across STEM and Non-STEM Fields," BEMPS - Bozen Economics & Management Paper Series BEMPS70, Faculty of Economics and Management at the Free University of Bozen.
    5. Agasisti, Tommaso & Bratti, Massimiliano & Minaya, Veronica, 2021. "When Need Meets Merit: The Effect of Increasing Merit Requirements in Need-Based Student Aid," IZA Discussion Papers 14423, Institute of Labor Economics (IZA).
    6. Huang, Bin & Xu, Lei & Zhu, Yu, 2019. "Does the higher education expansion in the UK reduce the returns to education? A comparison of returning-from-work versus fresh out-of-school graduates," Economic Modelling, Elsevier, vol. 79(C), pages 276-285.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ireland, Norman & Naylor, Robin A. & Smith, Jeremy & Telhaj, Shqiponja, 2009. "Educational Returns, ability composition and cohort effects : theory and evidence for cohorts of early-career UK graduates," The Warwick Economics Research Paper Series (TWERPS) 906, University of Warwick, Department of Economics.
    2. Hani Mansour, 2012. "Does Employer Learning Vary by Occupation?," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 415-444.
    3. Georg Graetz, 2021. "On the interpretation of diploma wage effects estimated by regression discontinuity designs," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 228-258, February.
    4. Gaurab Aryal & Manudeep Bhuller & Fabian Lange, 2019. "Signaling and Employer Learning with Instruments," NBER Working Papers 25885, National Bureau of Economic Research, Inc.
    5. Theodore Koutmeridis, 2013. "The Market for "Rough Diamonds": Information, Finance and Wage Inequality," CDMA Working Paper Series 201307, Centre for Dynamic Macroeconomic Analysis, revised 14 Oct 2013.
    6. Tani, Massimiliano, 2017. "Local signals and the returns to foreign education," Economics of Education Review, Elsevier, vol. 61(C), pages 174-190.
    7. Timothy N. Bond & George Bulman & Xiaoxiao Li & Jonathan Smith, 2018. "Updating Human Capital Decisions: Evidence from SAT Score Shocks and College Applications," Journal of Labor Economics, University of Chicago Press, vol. 36(3), pages 807-839.
    8. Bond, Timothy N. & Bulman, George & Li, Xiaoxiao & Smith, Jonathan, 2016. "Updated Expectations and College Application Portfolios," MPRA Paper 69317, University Library of Munich, Germany.
    9. Light, Audrey & McGee, Andrew, 2015. "Does employer learning vary by schooling attainment? The answer depends on how career start dates are defined," Labour Economics, Elsevier, vol. 32(C), pages 57-66.
    10. Gonzalo Castex & Evgenia Kogan Dechter, 2014. "The Changing Roles of Education and Ability in Wage Determination," Journal of Labor Economics, University of Chicago Press, vol. 32(4), pages 685-710.
    11. Audrey Light & Andrew McGee, 2015. "Employer Learning and the “Importance†of Skills," Journal of Human Resources, University of Wisconsin Press, vol. 50(1), pages 72-107.
    12. Kreisman, Daniel & Smith, Jonathan & Arifin, Bondi, 2021. "Labor Market Signaling and the Value of College: Evidence from Resumes and the Truth," IZA Discussion Papers 14483, Institute of Labor Economics (IZA).
    13. Lepage, Louis Pierre, 2020. "Endogenous learning and the persistence of employer biases in the labor market," CLEF Working Paper Series 24, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    14. Lang, Kevin & Siniver, Erez, 2011. "Why is an elite undergraduate education valuable? Evidence from Israel," Labour Economics, Elsevier, vol. 18(6), pages 767-777.
    15. Emiko Usui & Seik Kim, 2013. "Employer Learning, Job Mobility, and Wage Dynamics," 2013 Meeting Papers 912, Society for Economic Dynamics.
    16. Wang, Jun & Li, Bo, 2020. "Does employer learning with statistical discrimination exist in China? Evidence from Chinese Micro Survey Data," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 319-333.
    17. Lundin, Martin & Nordström Skans, Oskar & Zetterberg, Pär, 2016. "Leadership experiences, labor market entry, and early career trajectories," Working Paper Series 2016:2, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    18. Lepage, Louis Pierre, 2021. "Endogenous learning, persistent employer biases, and discrimination," CLEF Working Paper Series 34, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    19. Steven Jacob Bosworth, 2019. "Higher education fees as signals," Economics Discussion Papers em-dp2019-16, Department of Economics, University of Reading.
    20. Bacalhau, Priscilla & Mattos, Enlinson & Ponczek, Vladimir Pinheiro, 2019. "College quality signaling and individual performance: effects on labor market outcomes after graduation," Textos para discussão 502, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).

    More about this item

    Keywords

    Graduate returns; higher education participation; ability composition;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:66056. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.