Returns to higher education in the very long-run: 1870–2010

ABSTRACT

This article examines the long-run effect of higher education, measured in average years of tertiary schooling, on the level and growth rate of national per capita income. It uses an improved dataset on educational attainments which not only reduces measurement error but also overcomes data comparability issues and allows us to estimate the long-run effect of human capital through higher education on economic development. Using unique long panel data for 36 advanced and emerging economies spanning over the period 1870–2010, we find that higher education has a positive and significant effect on the level and the growth rate of national per capita income. Specifically, our empirical results indicate that a 1% increase in educational attainment at higher education level would raise the growth rate of per capita income by about 0.01% to 0.02% over a five-year period. That is, at the sample mean, an increase in average tertiary education by one year would raise output growth by about 6% to 11% in five years. We find that the returns to female education are lower than the returns to male education at tertiary schooling levels. Our results are robust to alternative specifications.

KEYWORDS:

• Higher education
• human capital
• economic growth
• economic development

Acknowledgments

The author would like to thank Prof. Hugh Lauder (Editor-in-Chief) and the anonymous reviewers for their helpful comments on the previous version of this article. The usual disclaimer applies.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. The sample includes the following countries: Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Denmark, Ecuador, Finland, France, Germany, Greece,India, Indonesia, Ireland, Italy, Japan, Malaysia, Mexico, Netherlands, New Zealand, Norway, Peru, Philippines, Portugal, South Africa, Spain, Sweden, Switzerland, Taiwan, USA, United Kingdom, Uruguay and Venezuela.

Additional information

Notes on contributors

Abebe Hailemariam

Abebe Hailemariam is a PhD candidate and Teaching Associate in the Department of Economics at Monash University, Melbourne, Australia.  His research interests include macroeconomics, labour market, economic growth and development.