The Economic Value of a Law Degree
University of North Carolina at Chapel Hill School of Law; Seton Hall Law School; Harvard Law School - John M. Olin Center for Law and Economics
Rutgers Business School Newark and New Brunswick
March 21, 2014
Legal academics and journalists have marshaled statistics purporting to show that enrolling in law school is irrational. We investigate the economic value of a law degree and find the opposite: given current tuition levels, the median and even 25th percentile annual earnings premiums justify enrollment. For most law school graduates, the present value of a law degree typically exceeds its cost by hundreds of thousands of dollars. We improve upon previous studies by tracking lifetime earnings of a large sample of law degree holders. Previous studies focused on starting salaries, generic professional degree holders, or the subset of law degree holders who practice law. We also include unemployment and disability risk rather than assume continuous full time employment. After controlling for observable ability sorting, we find that a law degree is associated with a 73 percent median increase in monthly earnings and 60 percent increase in median hourly wages. The mean annual earnings premium of a law degree is approximately $57,200 in 2013 dollars. The law degree earnings premium is cyclical and recent years are within historical norms. We estimate the mean pre-tax lifetime value of a law degree as approximately $1,000,000.
Number of Pages in PDF File: 46
Keywords: Economic Value of a Law Degree, Law School Crisis, Human Capital, Labor Economics, Valuation, Tamanaha, Schlunk, Empirical, Earnings, Wage, Work Hours
JEL Classification: C1, I2, J24, J31, J44, J6, J7, K4, L31working papers series
Date posted: January 16, 2014 ; Last revised: May 8, 2014
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