The returns to UK degrees for foreign‐educated graduates

Abstract

Exploiting information on foreign qualifications for the first time, we estimate the returns to obtaining UK higher degrees for foreign graduates who migrated to the UK in their 20s. Accounting for direct measures of foreign and UK qualifications and country‐of‐origin fixed effects, we find substantial returns to obtaining UK (higher) degrees on hourly wages and occupational attainment for both genders, working mainly through occupational attainment. However, there is strong evidence that the effect of the high returns is driven by immigrants from countries where English is not a dominant language. Moreover, returns to UK (higher) degrees are more pronounced for graduates from low‐HDI/GDP countries, suggesting an important role for the incompatibility of education and skills between home and destination countries. We further examine the robustness of our results by using a partial identification method, and our findings suggest that the extent of selection on unobservables required to eliminate a positive treatment effect is too large to be plausible, especially for men. Our study extends previous research with the first evidence from the UK, by showing large positive effects of post‐migration investments in human capital acquisition on labour market outcomes. Obtaining UK higher degrees appears to reduce the informational uncertainty associated with foreign credentials, facilitate cultural and economic assimilation, and boost economic opportunities for foreign graduates, especially for those developing/poor country immigrants.