Article

Modelling the distribution of returns on higher education: A microsimulation approach

Pierre Courtioux, Stéphane Gregoir, and Dede Houeto

Abstract

Cost-sharing policies for higher education have been implemented in several countries in various ways. We argue that to assess their appropriateness and facilitate their implementation it is necessary to develop statistical indicators of the distribution of returns. When starting a higher education programme, the return on a particular degree is uncertain, and risk-adverse students or those from low-income families may be reluctant to enrol if this means taking out a loan. These statistical indicators would therefore be natural inputs of cost-sharing policies intended to preserve the individual economic incentives to go to university and simultaneously provide an insurance role. We present a dynamic microsimulation model of individual lifetime educational output in the French labour market which uses econometric modelling of individual wages, labour market transitions, social security contributions and benefits. It relies largely on labour force survey data and mortality tables. In the standard internal rate of return framework, the model is used to compute the distribution of returns to higher education, for a given generation. The results show that the percentage of negative returns is close to 3.5%.

Keywords

Return to education; Higher education; Dynamic microsimulation;

JEL codes

  • C6: Mathematical Methods • Programming Models • Mathematical and Simulation Modeling
  • J11: Demographic Trends, Macroeconomic Effects, and Forecasts
  • J24: Human Capital • Skills • Occupational Choice • Labor Productivity

Reference

Pierre Courtioux, Stéphane Gregoir, and Dede Houeto, Modelling the distribution of returns on higher education: A microsimulation approach, Economic Modelling, vol. 38, February 2014, pp. 328–340.

See also

Published in

Economic Modelling, vol. 38, February 2014, pp. 328–340