Is University education an investment or a consumption good in a small open economy?

Abstract

Traditionally, university education (UE) has been considered as an investment in human capital. In the last two decades, however, there is a transitional refocusing that people, by holding a university degree, enjoy certain intangible benefits, such as a lasting feeling of self-fulfilment and self-esteem, i.e., they simply treat UE as a consumption good. In this empirical study we take a broader view of UE by distinguishing and quantifying three kinds of benefits arising from UE: a) monetary benefits; b) social status benefits; c) psychic benefits, using a sample of 832 graduates of three Greek universities. We find that graduates of all three universities enjoy significant psychic benefits which are not influenced by family educational background, while monetary motivations are strong substitutes to psychic motivations, thus a deterioration of monetary incentives, e.g., during a period of economic crisis, will propel psychic benefits to a key motivational issue for undertaking UE.