Who benefits the most from a tertiary degree? A cross-national comparison of selection and the economic returns to post-secondary education

Jennifer A. Flashman, Yale University
Renee Luthra, University of Essex

Given a limited amount of resources and the prospect of an extended recession, it is critical to understand what is gained from the often substantial investments in post-secondary education by both individuals and the state. In this paper, we ask two questions: 1) What are the returns to a university education? and 2) How do these returns differ across country contexts? Drawing on panel data and matching techniques, we explore the covariation between the propensity to complete a university education and its economic returns. We utilize a cross-national approach, comparing parallel analyses of three country cases: the United States, the United Kingdom, and Germany. The educational characteristics of institutions in these three countries vary widely and this variation should lead to different returns to a university degree. By taking this approach, we can begin to discover in what educational contexts those most likely to benefit from a university degree actually attain one. Our initial findings reveal surprising consistency in the negative relationship between the propensity to complete college and its income returns in early adulthood. At age 33, English and Welsh men with the lowest propensity to attend university receive the greatest benefit from a university education. Men with propensities between 0 and .1 would increase their earnings 28% if they attended college. By contrast, men who are almost certain to attend college, with propensities between .8 and 1, would increase their earnings by only 4% if they attended college. These results mirror results from the United States: men with the lowest propensity to attend college stand to gain a 35% increase in earnings, whereas men at the highest propensity levels (.6-.8) would gain only 8%. The lower cost of University attendance in the UK does not appear to alter negative selection in terms of expected returns.