Cross Country Evidence on the Returns to Education: Patterns and Explanations

33 Pages Posted: 25 Feb 2002

See all articles by Kevin Denny

Kevin Denny

University College Dublin (UCD) - Department of Economics

Colm P. Harmon

The University of Sydney - School of Economics; IZA Institute of Labor Economics

Reamonn Lydon

Independent

Date Written: February 2002

Abstract

This Paper examines cross-country variations in the return to schooling for men and women and considers some of the stylized facts that have emerged from the extensive international literature on private returns to schooling. We examine the relationship across countries between these returns and a range of controls that can be grouped into three broad areas (i) supply factors, (ii) demand factors, and (iii) governmental policies and institutional factors. We find that the returns are decreasing in both labor force participation and, in some cases, in the average level of schooling in the population. In the multivariate analysis the only education variables that consistently matter are the proportions completing primary or third level education, which has negative and positive effects respectively. Standard measures of openness such as trade volume have positive effects, and we also find that measures of protection raise the return to schooling. Net inflows of foreign investment are associated with lower schooling returns - a result difficult to reconcile with the argument that capital is complementary to high skill labor and hence increases the skill premium.

Suggested Citation

Denny, Kevin and Harmon, Colm P. and Lydon, Reamonn P, Cross Country Evidence on the Returns to Education: Patterns and Explanations (February 2002). CEPR Discussion Paper No. 3199. Available at SSRN: https://ssrn.com/abstract=301879

Kevin Denny (Contact Author)

University College Dublin (UCD) - Department of Economics ( email )

Belfield
Dublin 4, Dublin 4
Ireland
+353 1 706 8399 (Phone)
+353 1 283 0068 (Fax)

Colm P. Harmon

The University of Sydney - School of Economics ( email )

Rm 370 Merewether (H04)
Sydney, NSW 2006 2008
Australia

IZA Institute of Labor Economics

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

Reamonn P Lydon

Independent ( email )

No Address Available

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