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The Returns to Education in Italy: A New Look at the Evidence

Author

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  • Lucifora, Claudio

    () (Università Cattolica del Sacro Cuore)

  • Comi, Simona

    () (University of Milan Bicocca)

  • Brunello, Giorgio

    () (University of Padova)

Abstract

The purpose of this paper is to provide an update of the empirical evidence on the private returns to education in Italy. First, we show that, whilst returns to education in Italy (based on gross wages) are in line with the European average, educational attainment is generally much lower (particularly at secondary and tertiary levels). How can we reconcile these findings? Based on a simple human capital model - where the optimal level of schooling is given by equating the marginal return to the marginal cost of education - we speculate that either marginal costs are steeper in Italy or that a larger share of the population involved in human capital investment faces high marginal costs in Italy compared to the European average. Second, we examine whether the estimated returns to education have varied significantly over time. The evidence is that returns have not changed much over the period 1977 to 1995, with the exception of 1993 and 1995, when they have increased significantly,especially among female employees. Quite interestingly, the observed increase in the returns to education has been almost completely driven by higher returns to education in the public sector. Assuming that skill biased technical change has been an important factor in shifting out the marginal returns to education, an important question for future research is why these shifts have only affected returns in the public sector of the economy. Third and last, we confirm the usual finding in the international literature that accounting for measurement error in years of schooling and/or for the endogeneity of educational choices by using instrumental variables significantly increases the returns to education with respect to estimates based on OLS methods. We also show that adding family background variables to the set of instruments significantly increases returns, which suggests that these variables affect mainly the subgroup of individuals with higher marginal returns to schooling.

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  • Lucifora, Claudio & Comi, Simona & Brunello, Giorgio, 2000. "The Returns to Education in Italy: A New Look at the Evidence," IZA Discussion Papers 130, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp130
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    Cited by:

    1. Piergiacomo Sibiano & Giuseppe Catalano, 2010. "Investigating school autonomy: a comparison between England and Italy," Investigaciones de Economía de la Educación volume 5,in: María Jesús Mancebón-Torrubia & Domingo P. Ximénez-de-Embún & José María Gómez-Sancho & Gregorio Gim (ed.), Investigaciones de Economía de la Educación 5, edition 1, volume 5, chapter 8, pages 155-184 Asociación de Economía de la Educación.
    2. Tullio Jappelli & Luigi Pistaferri, 2010. "Does Consumption Inequality Track Income Inequality in Italy?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 133-153, January.
    3. Roberto Basile & Sergio Destefanis & Mauro Costantini, 2005. "Unit root and cointegration tests for cross-sectionally correlated panels - Estimating regional production functions," ERSA conference papers ersa05p171, European Regional Science Association.
    4. Massimiliano Bratti, 2001. "Oltre la scuola dellÕobbligo. Un' analisi empirica della decisione di proseguire nellÕistruzione post-obbligatoria in Italia," Moneta e Credito, Economia civile, vol. 54(214), pages 175-203.
    5. Floro Ernesto Caroleo & Francesco Pastore, 2012. "Talking about the Pigou paradox: Socio-educational background and educational outcomes of AlmaLaurea," International Journal of Manpower, Emerald Group Publishing, vol. 33(1), pages 27-50, March.
    6. Antonio Ciccone & Federico Cingano & Piero Cipollone, 2004. "The Private and Social Return to Schooling in Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(3-4), pages 413-444, December.
    7. Concetta, MENDOLICCHIO, 2006. "A Disaggregate Analysis of Private Returns to Education in Italy," Discussion Papers (ECON - Département des Sciences Economiques) 2006054, Université catholique de Louvain, Département des Sciences Economiques.
    8. S. Lodde, 2007. "Human Capital And Productivity Growth In The Italian Regional Economies: A Sectoral Analysis," Working Paper CRENoS 200711, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    9. Brunello, Giorgio, 2002. "Absolute risk aversion and the returns to education," Economics of Education Review, Elsevier, vol. 21(6), pages 635-640, December.
    10. Paolo Naticchioni & Andrea Ricci, 2009. "Falling Educational Wage Premia in Italy," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 4, December.
    11. Strawinski, Pawel, 2007. "Changes In Return To Higher Education In Poland 1998-2004," MPRA Paper 5185, University Library of Munich, Germany.
    12. Michele Mosca & Francesco Pastore, 2009. "Wage Effects of Recruitment Methods: The Case of the Italian Social Service Sector," AIEL Series in Labour Economics,in: Marco Musella & Sergio Destefanis (ed.), Paid and Unpaid Labour in the Social Economy. An International Perspective, edition 1, chapter 8, pages 115-141 AIEL - Associazione Italiana Economisti del Lavoro.
    13. Tilahun Temesgen, 2006. "Decomposing Gender Wage Differentials in Urban Ethiopia: Evidence from Linked Employer-Employee (LEE) Manufacturing Survey Data," Global Economic Review, Taylor & Francis Journals, vol. 35(1), pages 43-66.
    14. Giuseppe Lucio Gaeta & Giuseppe Lubrano Lavadera & Francesco Pastore, 2017. "Much Ado about Nothing? The Wage Penalty of Holding a PhD Degree but Not a PhD Job Position," Research in Labor Economics,in: Skill Mismatch in Labor Markets, volume 45, pages 243-277 Emerald Publishing Ltd.
    15. Favaro, Donata & Magrini, Stefano, 2008. "Group versus individual discrimination among young workers: A distributional approach," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(5), pages 1856-1879, October.
    16. Costantini, Mauro & Destefanis, Sergio, 2009. "Cointegration analysis for cross-sectionally dependent panels: The case of regional production functions," Economic Modelling, Elsevier, vol. 26(2), pages 320-327, March.
    17. Paolo Naticchioni & Andrea Ricci, 2009. "Decreasing Wage Inequality in Italy: The Role of Supply and Demand for Education," Working Papers - Dipartimento di Economia 9-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2009.
    18. Heijke, J.A.M. & Meng, C.M. & Ramaekers, G.W.M., 2002. "An investigation into the role of human capital competences and their pay-off," ROA Research Memorandum 3E, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    19. Gaeta, Giuseppe Lucio & Lubrano Lavadera, Giuseppe & Pastore, Francesco, 2016. "Much Ado About Nothing? The Wage Effect of Holding a Ph.D. Degree But Not a Ph.D. Job Position," IZA Discussion Papers 10051, Institute for the Study of Labor (IZA).
    20. A. Dalmazzo & Guido De Blasio, 2003. "Social Returns to Education; Evidence From Italian Local Labor Market Areas," IMF Working Papers 03/165, International Monetary Fund.
    21. B. Müge Tunaer & Yaprak Gülcan, 2006. "Measuring Returns to Education in Turkey," Papers of the Annual IUE-SUNY Cortland Conference in Economics,in: Proceedings of the Conference on Human and Economic Resources, pages 66-71 Izmir University of Economics.
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    23. P. G. Lovaglio & S. Verzillo, 2016. "Heterogeneous economic returns to higher education: evidence from Italy," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(2), pages 791-822, March.
    24. Giuseppe Croce, 2016. "La rincorsa mancata. Istruzione e cambiamento tecnologico in Italia a confronto con le altre economie avanzate," QUADERNI DI ECONOMIA DEL LAVORO, FrancoAngeli Editore, vol. 2016(106), pages 77-99.
    25. Strawinski, Pawel, 2009. "External Return to Education in Europe," IRISS Working Paper Series 2009-09, IRISS at CEPS/INSTEAD.

    More about this item

    Keywords

    earnings; Education;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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