Returns to Education in the Context of Higher Education Expansion

This chapter aims to provide an updated but concise survey of progress in recent research on gross monetary returns to years of schooling as measured through Mincer earnings (wage) equation estimates. After covering the average returns to years of schooling, which implicitly assumes homogenous quality, we focus more on the empirical evidence of heterogeneous returns by prior attainment, socio-economic status (SES) and ability, as well as post-compulsory educational choices. Motivated by the substantial expansion in higher education in virtually all countries in recent decades, we also evaluate studies that explore the returns for marginal students who barely pass some pre-defined admission threshold. Despite the increases in compulsory schooling and rapid expansion of higher education, the returns to post-compulsory education remain significantly positive for most people, but with substantial variation by subject and institution type, as well as by individual characteristics and family background.