Returns to Education
Updated 2026-08-05
INTRODUCTION
English translation pending.
CORE DEFINITION
A measure of the payoff from investing in schooling, estimated with the Mincer earnings function introduced by Jacob Mincer. Private returns capture the earnings premium an individual gains from extra years of education, while social returns add spillovers such as faster growth, lower crime and better health. Returns are usually expressed as the percentage increase in earnings per additional year of schooling. Estimates are credible only when ability, family background and self-selection into schooling are controlled for, since more able people both stay in school longer and earn more regardless.
SCAFFOLDING EFFECT
Reduce cognitive load
- Investment Appraisal: price a degree against its tuition cost and the earnings you forgo. - Policy Trade-off: compare returns across levels and fields before targeting public spending. - Equity Check: ask who actually captures the returns before subsidising them.
Anchor fast decisions
Extra schooling raises productivity and, in most labour markets, wages. The Mincer function regresses log earnings on years of schooling and work experience, so the schooling coefficient reads directly as a rate of return. Because schooling is chosen rather than assigned, that coefficient also absorbs the effect of unobserved ability, which is why credible estimates rely on instrumental variables, twin studies or natural experiments.
MINIMUM ACTION
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Source support: Explicit
- baike.baidu.comhttps://baike.baidu.com/item/%E6%95%99%E8%82%B2%E5%9B%9E%E6%8A%A5%E7%8E%87verified
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