The Private Internal Rates of Return to Tertiary Education

Abstract

The private internal rates of return to tertiary education: new estimates for 21 OECD countriesThis study provides estimates of the private Internal Rates of Return (IRR) to tertiary education for women and men in 21 OECD countries, for the years between 1991 and 2005. IRR are computed by estimating labour market premia on cross-country comparable individual-level data. Labour market premia are then adjusted for fiscal factors and education cost. Returns to an additional year of tertiary education are, on average, above 8% and vary in a range from 4 to 15% in the countries and in the period under study. IRR are relatively homogenous across gender. Overall, a slightly increasing trend is observed over time. The study discusses various policy levers for shaping individual incentives to invest in tertiary education and provides some illustrative quantification of the impact of policy changes on those incentives.