Differences by Degree: Evidence of the Net Financial Rates of Return to Undergraduate Study for England and Wales

28 Pages Posted: 25 Oct 2010

See all articles by Ian Walker

Ian Walker

University of Warwick - Department of Economics; Institute for Fiscal Studies (IFS); IZA Institute of Labor Economics

Yu Zhu

University of Kent - Department of Economics

Abstract

This paper provides estimates of the impact of higher education qualifications on the earnings of graduates in the UK by subject studied. We use data from the recent UK Labour Force Surveys which provide a sufficiently large sample to consider the effects of the subject studied, class of first degree, and postgraduate qualifications. Ordinary Least Squares estimates show high average returns for women that does not differ by subject. For men, we find very large returns for Law, Economics and Management but not for other subjects ヨ we even find small negative returns in Arts, Humanities and other Social Sciences. Quantile Regression estimates suggest negative returns for some subjects at the bottom of the distribution, or even at the median. Degree class has large effects in all subjects suggesting the possibility of large returns to effort. Postgraduate study has large effects, independently of first degree class. A large rise in tuition fees across all subjects has only a modest impact on relative rates of return suggesting that little substitution across subjects would occur. The strong message that comes out of this research is that even a large rise in tuition fees makes little difference to the quality of the investment ヨ those subjects that offer high returns (LEM for men, and all subjects for women) continue to do so. And those subjects that do not (especially OSSAH for men) will continue to offer poor returns. The effect of fee rises is dwarfed by existing cross subject differences in returns.

Keywords: rate of return, college premium

JEL Classification: I23, I28

Suggested Citation

Walker, Ian and Zhu, Yu, Differences by Degree: Evidence of the Net Financial Rates of Return to Undergraduate Study for England and Wales. IZA Discussion Paper No. 5254, Available at SSRN: https://ssrn.com/abstract=1696858 or http://dx.doi.org/10.2139/ssrn.1696858

Ian Walker (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
+44 1203 523 054 (Phone)
+44 1203 523 032 (Fax)

Institute for Fiscal Studies (IFS)

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

IZA Institute of Labor Economics

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

Yu Zhu

University of Kent - Department of Economics ( email )

Keynes College
Kent, CT2 7NP
United Kingdom

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