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Returns to Human Capital in Europe: A Literature Review
Economics of Education Review 21 (2002) 187–194 www.elsevier.com/locate/econedurev
Book reviews Returns to Human Capital in Europe: A Literature Review Edited by Rita Asplund and Pedro Telhado Pereira. Helsinki: ETLA, The Research Institute of the Finnish Economy, 1999, p. 368. Price: 250 FIM (paper) For a number of years now, the European Union is subsidizing cross-national research in Europe through the Targetted Socio-Economic Research program (TSER). The idea is that economists and social scientists from various European countries work together on a common topic that is both of scientific interest and relevant to the policy makers of the European Commission. The collection of papers in this book are the result of a TSER project on “Public Funding and Private Returns to Education” (PURE). In the words of the editors of this volume, the overriding aim of this project is “(…) to study the impact of different systems of public financial support on school attendance and of differences in educational differentiation and school administration rules on observed outcomes in the labour market, in particular, in terms of private returns to education and educationrelated inequality in earnings.” This sounds more than it is. This volume contains 16 chapters: one short introductory chapter and 15 chapters with estimates of rates of returns to years of education for 15 European countries. Each of the 15 country specific chapters gives an overview of previous research on the rate of return to education for the country under consideration followed by some new estimates. If you are interested in the rate of return to education in countries like Austria, Finland, Switzerland or the Netherlands, this is recommended reading for you. The aim of the Socio-Economic Research programs of the European Union is both to foster academic research in Europe and to provide relevant information for European policy makers. The studies collected in this volume are all applications of the standard well-known Mincerian wage equation with years of education as an exogenous variable and control variables for individual, occupational and industry characteristics. The main contribution of this project to our body of knowledge in this field should therefore primarily lie in the comparability of the results across European countries. Is education rewarded at a higher rate in — let’s say — Italy * Tel.: +31 43 388 1588; fax: +31 43 367 0960. PII: S 0 2 7 2 - 7 7 5 7 ( 0 1 ) 0 0 0 1 3 - 9
than in Sweden? And if so, why? It is somewhat disappointing that in the introductory chapter the editors make it clear that the estimates for the different countries in the project can not be compared. According to the editors, the lack of comparability is due to differences in estimation techniques and data sets used. Some more coordination in the research activities would have avoided this and would have increased the value of the outcome of this project. After all, why make all the effort to put together research from 15 different countries if you believe the outcomes can not be compared? Contrary to their own evaluation of the comparability of the results, the editors do make a comparison of the rates of return to education for men in 12 of the 15 countries under consideration. The rate of return estimates vary from 0.041 in Sweden to 0.097 in Portugal. In eight of these countries the rate of return to education for men is somewhere between 0.06 and 0.08. It is further concluded that in countries where the support for students in the form of grants and loans is high, the returns to education appear to be lower. This, however, remains one of the few conclusions drawn from the comparison of the country specific studies. A summary of selected OLS estimates reported in the country specific chapters show a wide variety in the returns to years of schooling. In most countries the highest estimate of the return to education is about twice as large as the lowest estimate. Combine this with the fact that the highest estimate of the rate of return in any country (19% for women in France) is nearly twenty times higher than the lowest estimate in any country (1% for men in Austria) and it becomes clear why the results from this project provide such little basis for conclusions. Wim Groot* Maastricht University, BEOZ, PO Box 616, 6200 MD Maastricht, The Netherlands E-mail address: [email protected] When Schools Compete: A Cautionary Tale Edward B. Fiske and Helen F. Ladd; Brookings Institution Press, Washington, DC, 2000, pp. vii+342, Price $47.95 cloth School choice is one of the most controversial educational reforms in the US today, likely because it is * Tel.: +1-609-258-4042; fax: +1-609-258-2907.
Book reviews Returns to Human Capital in Europe: A Literature Review Edited by Rita Asplund and Pedro Telhado Pereira. Helsinki: ETLA, The Research Institute of the Finnish Economy, 1999, p. 368. Price: 250 FIM (paper) For a number of years now, the European Union is subsidizing cross-national research in Europe through the Targetted Socio-Economic Research program (TSER). The idea is that economists and social scientists from various European countries work together on a common topic that is both of scientific interest and relevant to the policy makers of the European Commission. The collection of papers in this book are the result of a TSER project on “Public Funding and Private Returns to Education” (PURE). In the words of the editors of this volume, the overriding aim of this project is “(…) to study the impact of different systems of public financial support on school attendance and of differences in educational differentiation and school administration rules on observed outcomes in the labour market, in particular, in terms of private returns to education and educationrelated inequality in earnings.” This sounds more than it is. This volume contains 16 chapters: one short introductory chapter and 15 chapters with estimates of rates of returns to years of education for 15 European countries. Each of the 15 country specific chapters gives an overview of previous research on the rate of return to education for the country under consideration followed by some new estimates. If you are interested in the rate of return to education in countries like Austria, Finland, Switzerland or the Netherlands, this is recommended reading for you. The aim of the Socio-Economic Research programs of the European Union is both to foster academic research in Europe and to provide relevant information for European policy makers. The studies collected in this volume are all applications of the standard well-known Mincerian wage equation with years of education as an exogenous variable and control variables for individual, occupational and industry characteristics. The main contribution of this project to our body of knowledge in this field should therefore primarily lie in the comparability of the results across European countries. Is education rewarded at a higher rate in — let’s say — Italy * Tel.: +31 43 388 1588; fax: +31 43 367 0960. PII: S 0 2 7 2 - 7 7 5 7 ( 0 1 ) 0 0 0 1 3 - 9
than in Sweden? And if so, why? It is somewhat disappointing that in the introductory chapter the editors make it clear that the estimates for the different countries in the project can not be compared. According to the editors, the lack of comparability is due to differences in estimation techniques and data sets used. Some more coordination in the research activities would have avoided this and would have increased the value of the outcome of this project. After all, why make all the effort to put together research from 15 different countries if you believe the outcomes can not be compared? Contrary to their own evaluation of the comparability of the results, the editors do make a comparison of the rates of return to education for men in 12 of the 15 countries under consideration. The rate of return estimates vary from 0.041 in Sweden to 0.097 in Portugal. In eight of these countries the rate of return to education for men is somewhere between 0.06 and 0.08. It is further concluded that in countries where the support for students in the form of grants and loans is high, the returns to education appear to be lower. This, however, remains one of the few conclusions drawn from the comparison of the country specific studies. A summary of selected OLS estimates reported in the country specific chapters show a wide variety in the returns to years of schooling. In most countries the highest estimate of the return to education is about twice as large as the lowest estimate. Combine this with the fact that the highest estimate of the rate of return in any country (19% for women in France) is nearly twenty times higher than the lowest estimate in any country (1% for men in Austria) and it becomes clear why the results from this project provide such little basis for conclusions. Wim Groot* Maastricht University, BEOZ, PO Box 616, 6200 MD Maastricht, The Netherlands E-mail address: [email protected] When Schools Compete: A Cautionary Tale Edward B. Fiske and Helen F. Ladd; Brookings Institution Press, Washington, DC, 2000, pp. vii+342, Price $47.95 cloth School choice is one of the most controversial educational reforms in the US today, likely because it is * Tel.: +1-609-258-4042; fax: +1-609-258-2907.