Internal Rate of Return on Investment in Higher Education in Europe

Jablonowski, Janusz

doi:10.2478/wrlae-2021-0010

Figures & Tables

Factor productivity, part I

Variable	PL	SK	EE	HU	LV	SI	MT	CY
Labour productivity, average: 2002–14	0.027	0.032	0.030	0.026	0.040	0.018	0.01	0.01^*

Probability to achieve the degree, part II

Variable	BE	FI	DE	FR	NL	ES	IT	AT	PT	IE	GR	LU
award prob.	0.81	0.96	0.91	0.81	0.81	0.78	0.86	0.88	0.91	0.97	0.81	0.72

Employment and unemployment data, part I

Data	PL PL = Poland, SK – Slovakia, EE – Estonia, HU – Hungary, LV – Latvia, SI – Slovenia, MT – Malta, CY – Cyprus.	SK	EE	HU	LV	SI	MT	CY
gross unempl. benefit (% gross salary)	0.10	0.09	-	0.11	-	-	-	-
net unempl. benefit (% net salary)	0.21	0.22	0.23	0.17	0.24	0.25	-	-
gross unempl. benefit (EUR)	96	85	-	86	-	-	-	-
net unempl. benefit (EUR)	106	107	173	62	120	161	-	-
unempl. rate (tot, av. 2002–2014)	0.12	0.14	0.10	0.08	0.12	0.07	0.16	0.12^*
empl. rate (tot, av. 2002–2014, % work. pop.)	0.57	0.59	0.66	0.57	0.63	0.65	0.58	0.60^*
empl. rate (lower sec., 2014)	0.46	0.36	0.61	0.50	0.55	0.50	0.55	0.5^*
empl. rate (upper sec., 2014)	0.67	0.73	0.77	0.73	0.72	0.70	0.67	0.6^*
empl. rate (Post-sec., non-tert., 2014)	0.70	0.74	0.78	0.81	0.72	-	-	0.7^*
empl. rate (Short-cycle tert., 2014)	0.61	0.79	0.82	0.82	0.86	0.77	-	0.7^*
empl. rate (Bachelors or equiv., 2014)	0.83	0.73	0.87	0.80	0.84	0.86	-	0.75^*
empl. rate (Masters or equiv., 2014)	0.88	0.81	0.86	0.87	0.88	0.87	0.85	0.8^*
empl. rate (upper sec., 2014)	0.95	0.85	0.89	0.89	0.93	0.92	0.85	0.8^*
empl. rate (av. w. tert., 2014)	0.80	0.78	0.84	0.84	0.85	0.85	0.81	0.8^*

Schooling and studying data, part I

Variable	PL	SK	EE	HU	LV	SI	MT	CY
Age at start of schooling, 2014	7	6	7	7	7	6	5	6^*
Schooling years, 2014	11.8	12.4	12.0	11.3	11.5	11.9	9.9
World Bank estimated years in school	12.2	12.4	12.9	11.5	12.6	12.1	10.0	11^*
Costs per student (thousand EUR./y, average)	6.7	7.8	8.7	7.5	6.2	9.1	8.4	8^*
Number of students (total, average, thousands)	1 777.1	197.2	60.0	332.1	90.0	91.3	12.8	11^*

Employment and unemployment data, part II

Data	BE BE – Belgium, FI – Finland, DE – Germany, FR – France, NL – Netherlands, ES – Spain, IT – Italy, AT – Austria, PT – Portugal, IE – Ireland, GR – Greece, LU – Luxembourg.	FI	DE	FR	NL	ES	IT	AT	PT	IE	GR	LU
gross unempl. benefit (% gross salary)	0.37	0.35	0.21	0.36	0.33	0.33	0.10	0.27	0.39	0.42	0.10	0.26
net unempl. benefit (% net salary)	0.62	0.49	0.41	0.49	0.38	0.39	0.23	0.52	0.43	0.58	0.21	0.30
gross unempl. benefit (EUR)	1472	1284	787	1105	1382	756	331	1019	570	1056	160	1082
net unempl. benefit (EUR)	978	989	693	669	637	415	230	700	290	820	95	919
unemployment rate (tot, av. 2002–2014)	0.08	0.08	0.08	0.09	0.05	0.16	0.09	0.04	0.10	0.09	0.16	0.04
(tot, av. 2002–2014, % work. pop.)	0.61	0.69	0.76	0.64	0.74	0.60	0.57	0.70	0.66	0.64	0.58	0.64
(lower secondary, 2014)	0.53	0.58	0.62	0.61	0.64	0.57	0.54	0.54	0.74	0.65	0.61	0.79
(upper secondary, 2014)	0.71	0.72	0.78	0.73	0.78	0.68	0.70	0.76	0.79	0.73	0.66	0.81
(Post-secondary, non-tertiary, 2014)	0.83	0.94	0.85	0.59	0.88	0.62	0.74	0.80	0.83	0.86	0.67	0.83
(Short-cycle tertiary, 2014)	0.78	0.80	0.89	0.83	0.86	0.75	-	0.84	-	0.76	0.79	-
(Bachelors or equivalent, 2014)	0.84	0.82	0.88	0.82	0.87	0.78	0.69	0.77	0.74	0.76	0.67	0.87
(Masters or equivalent, 2014)	0.86	0.85	0.88	0.86	0.90	0.81	0.81	0.89	0.86	0.87	0.76	0.86
empl. rate (Doctoral or equiv., 2014)	0.91	0.88	0.93	0.87	0.96	0.90	0.89	0.90	0.92	0.95	0.91	0.90
empl. rate (av. w. tert.), 2014)	0.84	0.86	0.89	0.79	0.89	0.77	0.78	0.84	0.84	0.81	0.73	0.83

Pension system data, part I

Variable	PL	SK	EE	HU	LV	SI	MT	CY
Real pension index., average 2002–14	0.05	0.06	0.08	0.08	0.06	0.08	0.03	0.03
Retirement age	62.1	61.0	63.7	62.6	63.4	62.3	59.9	60^*
Life expectancy at birth (total, 2014)	77.7	76.9	77.2	75.9	74.3	81.2	75	75^*
Gross repl. rate (mean)	0.49	0.66	0.52	0.74	0.52	0.42	0.57	0.5^*
Net repl. rate (mean)	0.59	0.85	0.62	0.95	0.68	0.63	0.70	0.7^*
Pension tax rate (mean)	0.10	0.16	0.03	0.07	0.03	0	0.10	0.10^*

Internal rate of return data, part I

Variable τ₀ = average labour-time gross tax rate on earnings, τ_un = tax rate for the unemployment benefits, τ = average lifetime gross tax rate, δ -, p_hi - average employment rate of higher education-level student, p_sec - average employment rate of secondary education-level, p˜ {\tilde p} - average weighted employment rate for secondary and tertiary levels, Ξ - survival rate for higher education students, τ_Δ - marginal tax rate for a person in a reference group, Θ - means a wage premium for each year of tertiary education, v - return on experience in the Mincerian equation, P_n - net income, Θ_n net wage premium for each year of tertiary education, g˜ {\tilde g} - growth in labour productivity over the past decade, ϖ - real growth rate of pensions, LE - life expectancy at birth, RR - pension benefit replacement rate. Further, p˜ {\tilde p} employment probability for people with upper secondary education, Y - length of the working period, Age₀ - age at which school education starts, RA - effective retirement age, ñ_R - pension premium factor, Pc˜ P\tilde c - direct private cost of tertiary education, expressed as a percentage of the average wage, Y₀ - secondary education graduates. OPPC - opportunity cost of schooling, DIRC - direct costs of schooling, IRR - internal rate of return on higher education.	PL	SK	EE	HU	LV	SI	MT	CY
τ₀	0.39	0.41	0.40	0.47	0.44	0.43	0.29	0.3^*
τ_un	0	0	0.15	0.27	0.24	0	0.10	0.1^*
τ	0.22	0.24	0.28	0.29	0.31	0.28	0.29	0.3^*
p˜ {\tilde p}	0.57	0.54	0.69	0.61	0.63	0.60	0.66	0.6^*
p_hi	0.80	0.78	0.84	0.83	0.85	0.85	0.84	0.8^*
p_sec	0.14	0.14	0.12	0.14	0.13	0.14	0.13	0.12^*
Ξ	0.86	0.85	0.85	0.87	0.85	0.93	0.80	0.8^*
τ_Δ	0.15	0.11	0.14	0.16	0.19	0.18	0.10	0.1^*
Θ	0.13	0.14	0.09	0.13	0.14	0.17	0.20	0.2^*
v	0.0004	0.0002	0.0001	0.0003	0.0002	0.0003	0.0001	0.0001^*
P_n	0.01	0.09	0.08	0.09	0.08	0.09	0.08	0.06^*
Θ_n	0.06	0.01	0.00	0.01	0.01	0.01	0.01	0.01^*
g˜ {\tilde g}	0.027	0.032	0.030	0.026	0.040	0.018	0.011	0.010^*
ϖ	0.05	0.06	0.08	0.07	0.06	0.08	0.03	0.04^*
LE	77.7	76.9	77.2	75.9	74.3	81.2	75	75^*
RA	62.1	61.1	63.7	62.6	63.4	62.3	59.9	60^*
R	−0.014	−0.017	−0.021	−0.013	−0.026	0.005	0.01	0.01^*
Y	43.3	42.7	44.7	44.3	44.9	44.4	40.1	40^*
τ_ν	0.10	0.16	0.03	0.07	0.03	0.9	0.11	0.10^*
RR	0.59	0.85	0.62	0.95	0.68	0.65	0.70	0.50^*
ñ_R	0.0040	0.0071	0.0035	0.0062	0.0084	0.0021	0.005	0.0032
Pc˜ P\tilde c	0.013	0.088	0.142	0.123	0.091	0.182	0.121	0.111
Y₀	42.9	42.7	43.8	44.1	43.8	44.2	43.0	44.0
OPPC	0.44	0.41	0.49	0.43	0.44	0.48	0.49	0.50
DIRC	0.12	0.10	0.10	0.14	0.10	0.11	0.18	0.15
IRR	0.18	0.21	0.14	0.17	0.16	0.20	0.15	0.14

Historical time series for the IRR (last column covers this study estimates)

Countries^*	1996	1997	1998	1999	2000	2001	2010	2011	2013	Average for 2014–2016
BE	0.06	0.06	0.07	0.06	0.06	0.07	-	0.14	0.11	0.17
FI	0.09	0.09	0.09	0.09	0.09	0.09	-	0.06	0.11	0.18
LU	0.12	0.11	0.10	0.11	0.11	0.10	0.10	0.12	-	0.18
GR	0.05	0.05	0.06	0.05	0.05	0.05	0.06	0.12	0.08	0.18
IE	0.07	0.08	0.11	0.10	0.09	0.09	0.15	0.11	0.17	0.21
MT	-	-	-	-	-	-	-	0.11		0.20
CY	-	-	-	-	-	-	-	0.11		0.16
FR	0.09	0.09	0.10	0.09	0.10	0.09	-	0.07	0.09	0.13
AT	0.08	0.07	0.08	0.08	0.09	0.08	-	0.07	0.10	0.17
NL	0.07	0.06	0.06	0.04	0.05	0.06	-	0.11	0.07	0.14
SI	-	-	-	-	-	-	-	0.14	0.17	0.20
IT	0.05	0.06	0.06	0.06	0.06	0.06	-	0.09	0.07	0.18
ES	0.06	0.04	0.04	0.03	0.02	0.05	-	0.06	0.11	0.14
HU	0.07	0.06	-	-	-	-	-	0.21	0.22	0.17
DE	0.06	0.06	0.06	0.07	0.07	0.06	-	-	0.08	0.17
PL	-	0.08	0.09	0.09	0.07	-	-	0.14	0.22	0.18
PT	0.16	0.13	0.14	0.12	0.14	0.11	-	-	0.16	0.13
SK	-	-	-	-	-	-	-	0.13	0.20	0.21
EE	-	-	-	-	-	-	-	0.06	0.20	0.14
LV	-	-	-	-	-	-	0.19	0.08	-	0.16

Schooling and studying, part II

Variable	BE	FI	DE	FR	NL	ES	IT	AT	PT	IE	GR	LU
Age at start of schooling, 2014	6	7	6	6	6	6	6	6	6	5	6	6
Schooling years, 2014	10.9	10.3	12.9	11.1	11.9	9.6	10.1	10.8	8.2	11.6	10.2	11.3
WB estimated years in school	11.9	14.2	13.9	10.9	11.7	9.5	10.2	12.3	7.8	12.5	10.7	11.6
Annual costs per student (thousand EUR)	11.9	13.5	12.7	12.2	14.3	9.5	8.4	12.6	8.4	10.3	8.4	30.8
Number of students (thousands)	496.4	305.9	2 890.0	2 383.7	842.6	1 971.8	1 863.5	423.3	356.9	201.7	677.4	6.9

Probability to achieve the degree, part I

Variable	PL	SK	EE	HU	LV	SI	MT	CY
Award probability	0.86	0.85	0.85	0.87	0.85	0.93	0.8	0.8^*

Marginal tax rates from the Organisation for Economic Co-operation and Development data: gross–gross data, so including employers’ wedge, part II

Variable	BE	FI	DE	FR	NL	ES	IT	AT	PT	IE	GR	LU
Total tax wedge, average: 2002–14	0.67	0.55	0.62	0.55	0.49	0.47	0.54	0.60	0.49	0.39	0.52	0.53

Pension system data, part II

Variable	BE	FI	DE	FR	NL	ES	IT	AT	PT	IE	GR	LU
Real pension index., average 2002–14	0.03	0.03	0.03	0.03	0.03	0.02	0.03	0.03	0.02	0.03	0.03	0.03
Retirement age	59.9	61.9	62.7	59.3	62.9	62.2	61.4	62.2	67.0	65.3	61.5	61.9
Life expectancy at birth (total, 2014)	81.4	81.3	81.2	82.8	81.8	83.3	83.2	81.6	81.2	81.4	81.5	82.3
Gross repl. rate	0.41	0.55	0.42	0.59	0.91	0.74	0.71	0.77	0.55	0.37	0.54	0.56
Net repl. rate	0.62	0.63	0.57	0.71	1	0.80	0.81	0.90	0.68	0.45	0.70	0.69
Pension tax rate	0.06	0.16	0.10	0.11	0.27	0.16	0.20	0.17	0.09	0.11	0.13	0.09

Marginal tax rates from the Organisation for Economic Co-operation and Development data: gross–gross data, so including employers’ wedge, part I

Variable	PL	SK	EE	HU	LV	SI	MT	CY
Average labour tax, 2002–14	0.39	0.46	0.43	0.67	-	0.54	-	0.3^*

Internal rate of return data, part II

Variable	BE	FI	DE	FR	NL	ES	IT	AT	PT	IE	GR	LU
τ₀ (= τ)	0.56	0.51	0.43	0.48	0.42	0.45	0.56	0.51	0.55	0.43	0.54	0.38
τ_un	0.33	0.23	0.11	0.39	0.54	0.45	0.30	0.22	0.49	0	0	0.15
τ	0.37	0.37	0.31	0.34	0.33	0.34	0.34	0.37	0.41	0.42	0.32	0.26
p˜ {\tilde p}	0.63	0.65	0.70	0.67	0.71	0.63	0.62	0.65	0.76	0.61	0.55	0.68
p_hi	0.85	0.86	0.87	0.79	0.89	0.77	0.78	0.84	0.84	0.81	0.73	0.83
p_sec	0.13	0.13	0.12	0.11	0.12	0.12	0.13	0.29	0.10	0.13	0.13	0.12
Ξ	0.81	0.96	0.91	0.81	0.81	0.78	0.86	0.88	0.91	0.97	0.81	0.71
τ_Δ	0.23	0.20	0.19	0.25	0.27	0.13	0.16	0.27	0.18	0.09	0.11	0.17
v	0.0002	0.0002	0.0007	0.0004	0.0002	0.0002	0.0001	0.0001	0.0001	0.0001	0.0001	0.00001
P_n	0.074	0.051	0.081	0.080	0.066	0.068	0.069	0.072	0.061	0.11	0.073	0.064
Θ_n	0.002	0.004	0.006	0.002	0.007	0.005	0.011	0.005	0.008	0.007	0.008	0.006
g˜ {\tilde g}	0.008	0.008	0.013	0.081	0.092	0.011	0.001	0.011	0.0102	0.038	0.001	0.004
ϖ	0.03	0.03	0.03	0.03	0.03	0.02	0.01	0.03	0.02	0.03	0.03	0.03
LE	81.4	81.3	81.2	82.8	81.8	83.3	83.2	81.6	81.2	81.3	81.5	82.3
RA	59.9	61.9	62.7	59.4	62.9	62.2	61.4	62.2	67.0	65.4	61.5	61.9
Y	43.0	44.6	43.8	42.3	45.0	46.6	45.3	45.4	52.8	48.8	45.4	44.6
τ_ν	0.06	0.16	0.11	0.11	0.27	0.16	0.20	0.17	0.10	0.11	0.13	0.09
RR	0.62	0.63	0.57	0.71	1	0.80	0.81	0.90	0.68	0.45	0.70	0.69
ñ_R	0.0003	0.0025	0.0029	0.0016	0.0040	0.0002	0.0039	0.0040	0.0020	0.0031	0.0032	0.002
Pc˜ P\tilde c	0.013	0.028	0.003	0.006	0.027	0.010	0.003	0.023	0.166	0.043	0.18	0.02
Y₀	42.1	40.1	42.8	42.5	45.2	46.7	45.2	43.9	53.2	47.6	44.9	44.3
OPPC	0.41	0.42	0.49	0.46	0.48	0.45	0.43	0.41	0.48	0.55	0.37	0.50
DIRC	0.07	0.07	0.05	0.07	0.03	0.09	0.06	0.07	0.08	0.04	0.18	0.02
IRR	0.17	0.18	0.17	0.13	0.11	0.14	0.18	0.18	0.13	0.21	0.15	0.14

Factor productivity, part II

Variable	BE	FI	DE	FR	NL	ES	IT	AT	PT	IE	GR	LU
Labour productivity, average: 2002–14	0.008	0.009	0.01	0.08	0.09	0.010	0.001	0.011	0.010	0.04	0.00	0.04

Internal Rate of Return on Investment in Higher Education in Europe

Figures & Tables

Factor productivity, part I

Probability to achieve the degree, part II

Employment and unemployment data, part I

Schooling and studying data, part I

Employment and unemployment data, part II

Pension system data, part I

Internal rate of return data, part I

Historical time series for the IRR (last column covers this study estimates)

Schooling and studying, part II

Probability to achieve the degree, part I

Marginal tax rates from the Organisation for Economic Co-operation and Development data: gross–gross data, so including employers’ wedge, part II

Pension system data, part II

Marginal tax rates from the Organisation for Economic Co-operation and Development data: gross–gross data, so including employers’ wedge, part I

Internal rate of return data, part II

Factor productivity, part II

Paradigm

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