How Large are Returns to Schooling? Hint: Money Isn't Everything

52 Pages Posted: 15 Sep 2009 Last revised: 13 Oct 2009

See all articles by Philip Oreopoulos

Philip Oreopoulos

University of Toronto - Department of Economics; National Bureau of Economic Research (NBER); Canadian Institute for Advanced Research (CIFAR)

Kjell G. Salvanes

Norwegian School of Economics (NHH) - Department of Economics; IZA Institute of Labor Economics

Date Written: September 2009

Abstract

This paper explores the many avenues by which schooling affects lifetime well-being. Experiences and skills acquired in school reverberate throughout life, not just through higher earnings. Schooling also affects the degree one enjoys work and the likelihood of being unemployed. It leads individuals to make better decisions about health, marriage, and parenting. It also improves patience, making individuals more goal-oriented and less likely to engage in risky behavior. Schooling improves trust and social interaction, and may offer substantial consumption value to some students. We discuss various mechanisms to explain how these relationships may occur independent of wealth effects, and present evidence that non-pecuniary returns to schooling are at least as large as pecuniary ones. Ironically, one explanation why some early school leavers miss out on these high returns is that they lack the very same decision making skills that more schooling would help improve.

Suggested Citation

Oreopoulos, Philip and Salvanes, Kjell G., How Large are Returns to Schooling? Hint: Money Isn't Everything (September 2009). NBER Working Paper No. w15339. Available at SSRN: https://ssrn.com/abstract=1472277

Philip Oreopoulos (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Canadian Institute for Advanced Research (CIFAR)

180 Dundas Street West, Suite 1400
Toronto, Ontario
Canada

Kjell G. Salvanes

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway
+47 5 595 9315 (Phone)
+47 5 595 9543 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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