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The Changing Wage Return to an Undergraduate Education

  • O'Leary, Nigel C.

    ()

    (Swansea University)

  • Sloane, Peter J.

    ()

    (Swansea University)

Between 1990/91 and 2000/01 the number of male undergraduates in Britain increased by over one-third while the number of female undergraduates has increased nearly twofold. Given this substantial increase in supply we would expect some impact on the wage premium for recent graduates unless demand has shifted in parallel. Following Katz and Murphy (1992), we adopt a simple supply and demand framework to analyse changes in earnings mark-ups across degree disciplines over time. Using a propensity score approach to match those graduates entering the labor market with an age balanced sample of individuals with two or more A-Levels from the Labour Force Survey, we find a significant decline in the mark-up for females, whilst no such change is apparent for males. These aggregate figures, however, mask a great deal of variation across degree subjects, with declines in those subjects in which women predominate and in the lowest quartile of the earnings distribution being identified. The results point to both supply and demand factors impacting on the graduate mark-up as theory would suggest.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1549.

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Length: 27 pages
Date of creation: Mar 2005
Date of revision:
Publication status: published as 'The Wage Premium for University Education in Great Britain During a Decade of Change' in: Manchester School, 2011, 79 (4), 740 - 764
Handle: RePEc:iza:izadps:dp1549
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  1. Naylor, Robin & Smith, Jeremy & McKnight, Abigail, 2002. "Why Is There a Graduate Earnings Premium for Students from Independent Schools?," Bulletin of Economic Research, Wiley Blackwell, vol. 54(4), pages 315-39, October.
  2. Steven McIntosh, 2004. "Further analysis of the returns to academic and vocational qualifications," LSE Research Online Documents on Economics 19472, London School of Economics and Political Science, LSE Library.
  3. Lorraine Dearden & Steven McIntosh & Michal Myck & Anna Vignoles, 2000. "The Returns to Academic and Vocational Qualifications in Britain," CEE Discussion Papers 0004, Centre for the Economics of Education, LSE.
  4. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2002. "Does education raise productivity, or just reflect it?," Working Papers 10197/1104, School of Economics, University College Dublin.
  5. Trostel, P. & Walker, I., 2000. "Education and Work," The Warwick Economics Research Paper Series (TWERPS) 554, University of Warwick, Department of Economics.
  6. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  7. Sloane, Peter J. & O'Leary, Nigel C., 2004. "The Return to a University Education in Great Britain," IZA Discussion Papers 1199, Institute for the Study of Labor (IZA).
  8. Harmon, Colm & Walker, Ian, 2000. "The Returns to the Quantity and Quality of Education: Evidence for Men in England and Wales," Economica, London School of Economics and Political Science, vol. 67(265), pages 19-35, February.
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