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The Returns to Postgraduate Education


  • Fumihiko SUGA


This paper aims to estimate the returns to postgraduate education in Japan, taking potential self-selection bias due to the absence of information on academic ability and the business cycle into consideration. The effect of earning a master's degree on wages is estimated using Japanese Panel Survey of Consumers (JPSC) data that contains extensive information on individuals' undergraduate subjects and type of university (private or public). The estimates using ordinary least squares (OLS) and Heckman two-step estimation respectively indicate that postgraduate wage premiums in Japan are 25.0% and 26.4% for men and 23.7% and 24.7% for women. The estimation results suggest that workers’ undergraduate subject and type of university (private or public) explain only a small fraction of the postgraduate wage premium. Moreover, in order to account for the self-selection bias, graduate enrollment capacity is employed as an instrumental variable (IV). In the IV regressions, the estimated postgraduate wage premium is not statistically significant. The estimates are not significant even in the regression using Working Person Survey (WPS) data, which has a much larger sample size than the JPSC. Although IV regressions of log wage do not provide positive and statistically significant results, the estimated effect of postgraduate education for male workers on job satisfaction is positive and statistically significant. It indicates that Japanese males obtain a master’s degree not for higher wage, but for non-pecuniary benefits.

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  • Fumihiko SUGA, 2017. "The Returns to Postgraduate Education," ESRI Discussion paper series 336, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esj:esridp:336

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    1. Hamaaki, Junya & Hori, Masahiro & Maeda, Saeko & Murata, Keiko, 2013. "How does the first job matter for an individual’s career life in Japan?," Journal of the Japanese and International Economies, Elsevier, vol. 29(C), pages 154-169.
    2. Hussey, Andrew, 2012. "Human capital augmentation versus the signaling value of MBA education," Economics of Education Review, Elsevier, vol. 31(4), pages 442-451.
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    4. Song, Moohoun & Orazem, Peter F. & Wohlgemuth, Darin, 2008. "The role of mathematical and verbal skills on the returns to graduate and professional education," Economics of Education Review, Elsevier, vol. 27(6), pages 664-675, December.
    5. Ryusuke Shimizu & Yoshio Higuchi, 2009. "The Value of MBA Education in the Japanese Labor Market," Japanese Economy, Taylor & Francis Journals, vol. 36(4), pages 61-104.
    6. Matthew T. Johnson, 2013. "The Impact of Business Cycle Fluctuations on Graduate School Enrollment," Mathematica Policy Research Reports 77da29f047574fbfb5f216d63, Mathematica Policy Research.
    7. Jaeger, David A & Page, Marianne E, 1996. "Degrees Matter: New Evidence on Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 733-740, November.
    8. Taubman, Paul J & Wales, Terence J, 1973. "Higher Education, Mental Ability, and Screening," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 28-55, Jan.-Feb..
    9. Johnson, Matthew T., 2013. "The impact of business cycle fluctuations on graduate school enrollment," Economics of Education Review, Elsevier, vol. 34(C), pages 122-134.
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