Internal Rate of Return on Investment in Higher Education in Europe

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

* Country symbols are as follows: BE – Belgium, FI – Finland, LU – Luxembourg, GR – Greece, IE – Ireland, MT – Malta, CY – Cyprus, FR – France, AT – Austria, NL – Netherlands, SI – Slovenia, IT – Italy, ES – Spain, HU – Hungary, DE -Germany, PL – Poland, PT – Portugal, SK – Slovakia, EE – Estonia and LV – Latvia.

Source: Boerini and Strauss (2010) for 1996–2001, Romele (2013) for 2010, Psacharopoulos and Patrinos (2018) for 2011, Poteliene and Tamasauskiene (2014) for 2013, and own calculations for the period 2014–2016.

Table A1

Employment and unemployment data, part I

Data	PL5	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^*

Source: Own calculations;

* means an educated guess.

av. = average; empl. = employment; equiv. = equivalent; sec. = secondary; tert. = tertiary; tot = total; unempl. = unemployment; work. pop. = working population, av. w. tert. = average weighted tertiary.

5 PL = Poland, SK – Slovakia, EE – Estonia, HU – Hungary, LV – Latvia, SI – Slovenia, MT – Malta, CY – Cyprus.

Table A2

Employment and unemployment data, part II

Data	BE6	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

Source: Own calculations based on Organisation for Economic Co-operation and Development data.av. = average; empl. = employment; tot = total; unempl. = unemployment; work. pop. = working population, , av. w. tert. = average weighted tertiary.

6 BE – Belgium, FI – Finland, DE – Germany, FR – France, NL – Netherlands, ES – Spain, IT – Italy, AT – Austria, PT – Portugal, IE – Ireland, GR – Greece, LU – Luxembourg.

Table A3

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^*

Source: Own calculations;

* means an educated guess.

Table A4

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

[i] Source: Own calculations based on Organisation for Economic Co-operation and Development data.

Table A5

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^*

[i] Source: Own calculations based on Organisation for Economic Co-operation and Development data.

Table A6

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

Table A7

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^*

Source: Own calculations;

* means an educated guess.

Table A8

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

[i] Source: Own calculations based on Organisation for Economic Co-operation and Development data.

Table A9

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^*

Source: Own calculations;

* means an educated guess, repl. = replacement.

Table A10

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

[i] Source: Own calculations based on Organisation for Economic Co-operation and Development data.

Table A11

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^*

[i] Source: Own calculations based on Organisation for Economic Co-operation and Development data.

Table A12

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

[i] Source: Own calculations based on Organisation for Economic Co-operation and Development data.

Table A13

Internal rate of return data, part I

Variable 7	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^*
$\tilde{p}$	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^*
$\tilde{g}$	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
$P \tilde{c}$	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

Source: Own calculations;

* means an educated guess.

7 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, $\tilde{p}$ - 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, $\tilde{g}$ - 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, $\tilde{p}$ 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, $P \tilde{c}$ - 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.

Table A14

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
$\tilde{p}$	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
$\tilde{g}$	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
$P \tilde{c}$	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

[i] Source: Own calculations.

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Articles in this issue

DOI: https://doi.org/10.2478/wrlae-2021-0010 | Journal eISSN: 2084-1264

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Language: English

Page range: 1 - 19

Published on: Sep 9, 2021

Published by: University of Wroclaw, Faculty of Law, Administration and Economics

In partnership with: Paradigm Publishing Services

Keywords:

higher education,

internal rate of return,

European Union,

Mincer wage equation

JEL:

C83,

I26,

J24,

O12

Related subjects:

Law,

Public law,

Public law, other

© 2021 Janusz Jablonowski, published by University of Wroclaw, Faculty of Law, Administration and Economics
This work is licensed under the Creative Commons Attribution 4.0 License.

Volume 11 (2021): Issue 1 (December 2021)