Educational Attainment and the Returns to Education for Australian Youth

Evidence of Self-Selection?

Published in: Economic Analysis and Policy, v. 21, no. 1, Mar. 1998, p. 29-45

Posted on RAND.org on December 31, 1990

by Noel Gaston, Roland Sturm

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Debates concerning the re-introduction of tertiary fees in Australia have made rates of return on education an active topic for investigation. This paper provides estimates of the returns to education that allow for worker heterogeneity and individual self-selection in the education process. Using data drawn from the Australian Longitudinal Survey, a sequential estimation procedure is used that enables us to study the interaction between educational attainment and earnings determination. We find that traditional OLS measures of rates of return to education are understated and hence, counsel caution in the interpretation and use of the estimated returns provided by some authors.

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