Private Rates Of Return Research Articles

Private and Social Returns to Investment in Education: the Case of Turkey with Alternative Methods

ABSTRACT This paper estimates private and social returns to investment in education in Turkey, using the 2017 Household Labour Force Survey (latest available at the time of writing) and alternative methodologies. The analysis uses the 1997 education reform of increasing compulsory education by three years as an instrument. This results in a private rate of return on the order of 16% for higher education and a social return of 10%. Using the number of children younger than age 15 in the household as an exclusion restriction, sample selection correction is applied, and it shows that the returns to education for females are higher than those for males. Contrary to many findings in other countries, private returns to those working in the public sector are higher than those in the private sector, and private returns to those who followed the vocational track in secondary education are higher than those in the general academic track. The paper discusses the policy implications of the findings.

Türkiye Yükseköğretim Sisteminde Eğitimin Getirileri: Ampirik Bir Uygulama

Bu araştırma üniversite de çeşitli bölümlerde yapılan sosyal ve bireysel eğitim yatırımlarının getiri oranlarını hesaplamayı amaçlamaktadır. Araştırmada tarama modeli kullanılmıştır. Çalışma gurubunu, on beş farklı yükseköğretim bölümünden mezun olup İstanbul’da özel sektörde ücretli olarak çalışan 795 kişi oluşturmaktadır. Maliyetlere ilişkin veriler YÖK’ün 1997 yılında yaptığı araştırmadan, kazançlara ilişkin verilerse araştırmacı tarafından geliştirilen anket aracılığıyla elde edilmiştir. Araştırmada sosyal ve bireysel getiriler kısa-yol yöntemiyle hesaplanmıştır. Ayrıca maliyet-fayda analizinde kullanılan yöntemlerden olan fayda-maliyet oranı ile üniversite yatırımının sosyal ve bireysel açıdan verimliliği test edilmiştir. Araştırmada şu bulgulara ulaşılmıştır: Tüm bölümlerde sosyal getiri oranları %5 -%14,8; bireysel getiriler %12,3 -%18,5 arasında değişmektedir. Üniversite eğitiminin sosyal getiri oranı %8,9, fayda-maliyet oranı 11,93; bireysel getiri oranı %16,6, fayda-maliyet oranı 15,17’dir. Cinsiyetler açısından anlamlı farklılık görülmemiştir. Bireysel getiri oranı kadınlar için %16,3, erkekler için %16,6 bulunmuştur. Bu hesaplamalar tüm Türkiye çapında ve bütün eğitim tür ve düzeylerinde daha geniş bir örneklem üzerinde yapılmalıdır.

The Economic Benefits of Malaysian University Degrees

AbstractThis study analyzes the net returns of educational investment in Malaysia using the net present value approach. The estimations consider the tuition payments of nine different bachelor degree programs of public and private universities in Malaysia and the forgone earnings while undertaking the degree programs as the cost of investments in human capital. The returns to education investment are based on the expected income accrued by the individual over the employment period until retirement. Under the assumptions that an individual would work until the retirement age of 60 years and a discount rate of 4 percent, the estimations show that holding a computer science degree from Universiti Sains Malaysia would give the highest net present value. Holding a medical degree, in general, would give the lowest net returns on educational investment as compared to the other selected programs. The net returns are sensitive to the costs of education, earnings and the duration of undertaking the degree programs.Keywords: Human capital investment, net present value, private rate of return, educational investment, Malaysian degree programmes

How Innovations affect Firm's Productivity? A literature reviews

Improving productivity is one of the vital tasks of an enterprise in the era of globalization. In which, innovation is widely considered as an essential solution to enhance the firm's productivity. However, there is still much controversy between concept as well as the measurement of innovation. Besides, the impact of innovation on firm's productivity is questionable, and most studies have focused on the direct effect. This paper has comprehensively analyzed the impact of innovations on productivity, including both direct and indirect impacts. Accordingly, direct effects through private rate of return reflect the investment efficiency of firms, the indirect impact through social rate of return reflects the overall impact of innovations on society and is interested in the governments. The study also reviewed three direct impact measures, the link between them and the important role of R&D consortium in improving regional and global productivity.

Returns to Investment in Education: The Case of Turkey

This paper estimates private and social returns to investment in education in Turkey, using the 2017 Household Labor Force Survey and alternative methodologies. The analysis uses the 1997 education reform of increasing compulsory education by three years as an instrument. This results in a private rate of return on the order of 16 percent for higher education and a social return of 10 percent. Using the number of children younger than age 15 in the household as an exclusion restriction, the analysis finds that returns to education for females are higher than those for males. Contrary to many findings in other countries, private returns to those working in the public sector are higher than those in the private sector, and private returns to those who followed the vocational track in secondary education are higher than those in the general academic track. The paper discusses the policy implications of the findings.

Returns to Investment in Education: The Case of Turkey

This paper estimates private and social returns to investment in education in Turkey, using the 2017 Household Labor Force Survey and alternative methodologies. The analysis uses the 1997 education reform of increasing compulsory education by three years as an instrument. This results in a private rate of return on the order of 16 percent for higher education and a social return of 10 percent. Using the number of children younger than age 15 in the household as an exclusion restriction, the analysis finds that returns to education for females are higher than those for males. Contrary to many findings in other countries, private returns to those working in the public sector are higher than those in the private sector, and private returns to those who followed the vocational track in secondary education are higher than those in the general academic track. The paper discusses the policy implications of the findings.

Returns to education in MENA countries: a continuing story of under-achievement

The paper provides a comparative study of private rates of return to education in five MENA countries to better understand the pattern of rewards to different levels of schooling. Moreover, the paper attempts to link the structure of returns to education to labour market, gender and different age groups. The findings confirm less consistency among countries and this is due to differences in education quality and supply and demand of graduates, which has a significant influence on returns to schooling. Returns to additional years of schooling are the highest for Tunisia and lowest for Egypt. On analysing the rate of return to education by socio-economic factors: returns to education for women are lower than for men, and older cohorts have highest returns particularly for Egypt and Tunisia. With respect to policymakers, MENA region should adopt education policies that target quality of education, which meets labour demand rather than expansion of education.

Rates of return to sorghum and millet research investments: A meta-analysis.

Sorghum and millet grow in some of the most heterogeneous and austere agroecologies around the world. These crops are amongst the top five cereal sources of food and feed. Yet, few studies document the impact of sorghum and millet genetic enhancement. The Internal Rate of Return (ROR) is one of the most popular metrics used to measure the economic return on investment on agricultural research and development (R&D). This study conducted a meta-analysis of 59 sorghum and millet ROR estimates obtained from 25 sources published between 1958 and 2015. The average rate of return to sorghum and millet R&D investment is between 54–76 percent per year. All studies computed social rather than private RORs because the technologies were developed using public funds originating from host country National Agricultural Research Systems (NARS) and international organizations such as the INTSORMIL CRSP, ICRISAT and others. Nearly three quarter of the studies focused only on sorghum (72 percent) and around one tenth of the studies (8 percent) on millet. Regression models analyzed the determinants of variation in the reported RORs. Results show that ex-ante type and self-evaluated type of analyses are positively and significantly associated with the ROR estimates. Compared to estimates conducted by a university, results from international institutions and other mixed organizations provided significantly smaller estimates. Estimates conducted at national level also are significantly lower than those conducted at sub-national levels. The ROR is higher for studies conducted in the United States and for those conducted more recently. The study also reconstructed modified internal rate of return (MIRR) for a sub-sample of the reported RORs following recent methods from the literature. These results show that the MIRR estimates are significantly smaller than the reported ROR estimates. Both results indicate that investment in sorghum and millet research generates high social rates of return.

Quality of Malaysian teachers based on education and training

PurposeThe purpose of this paper is to investigate how the quality of teachers based on education and training provided under new reform policies in Malaysia affects their earnings outcomes. The study conducted a benefit and returns analysis guided by human capital theory.Design/methodology/approachThe study used survey research methods to investigate human capital formation in the teaching profession using teachers’ qualifications, benefits and private rate of returns as key variables in the estimation.FindingsEarnings and experience levels were highly correlated with teachers’ education levels, as suggested by human capital theory. The private rate of returns in earnings for each additional year of schooling of teachers was found to lie between 3 and 4 per cent per year. Discrepancies were apparent in teachers’ qualifications and licensure levels regionally and at academic levels, as expected. These correlated with earning levels.Practical implicationsImprovements in teachers’ salary and employment opportunities will attract higher quality graduates to the teaching profession. Teachers’ annual earnings in Malaysia are comparable to other public sector and private professional jobs in the nation but lag far behind those of the world’s top education systems. Increasing teachers’ earnings will attract better qualified teachers. Policymakers could address these issues.Originality/valueThis paper demonstrates the utility of economic analyses in terms of earnings returns, to evaluate the Malaysian policy of upgrading teachers’ qualifications as a mechanism to improve the overall quality of schooling. Such studies are rare but needed to understand the benefits and returns of policy-driven teacher education and training investments. This study provides new evidence of schooling returns using a recent, national data set.

What's Happened to the Rate of Return to Business Masters?

While business masters degrees are popular with students wishing to enhance their career prospects, there is little evidence available on the private rate of return to these degrees in Australia. Furthermore, there is little evidence about the effects of the huge growth in graduates in recent decades and changing business conditions on the profitability of a business masters degree from an individual's point of view. This is despite the expectation that there would be significant consequences of the changes in demand and supply to the relative income of higher degree holders. This paper presents estimates of the rate of return in Australia associated with the completion of business masters degrees over the period 2001 and 2011. The results show that for the average person, there are incentives to complete these degrees, and the private rate of return compares favourably with the real long term real bond rate. However, the profitability of an investment in a business masters has fallen significantly over time.

Rates of Returns to Vocational and General Upper Secondary Education, and to Experience in Addressing the Hollow Middle in lndonesia, 2007

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Returns on Education for Male-Female Management Graduates in Malaysia

Education is an on-going effort towards further developing a nation in term of human capital investment and returns. Recent economic figures clearly show that, countries with better-educated workforce tend to have higher income, lower poverty rate and slower rate of population growth. Generally, education plays an important role in term of earnings and able to creates earnings discrimination among workers. This study attempts to investigate the private rate of returns for business and management graduates in Malaysia using cost and benefit analysis. In this study, data collection is based on random sampling conducted through the business and management graduates’ alumni division. The overall findings clearly indicate positive returns on education for male and female management graduate with an average of 15-30 percentages.

The Gender Differences in School Enrolment and Returns to Education in Pakistan

Using estimates of schooling demand function and private rate of return to education by gender derived from Household Integrated Economic Survey 2010-11, this paper attempts to examine if there is any dynamics to define a differential behaviour across gender in enrolment in Pakistan and if there is then what can be the possible cause of such discrepancies and how can they be reduced. The first set of analysis focuses on the estimates of probability of enrolment at primary, secondary and tertiary level of education by gender. Strong evidence for higher likelihood of enrolment emerges only at the secondary level of education when the gender is male. The behaviour of the determinants for these schooling demand functions at different levels of education differs by gender. One such key variable is parental education, which is more pronounced in case of mother’s education towards increasing the likelihood of enrolment of girls at the primary and secondary level and of father’s education for boys at all levels and girls at the tertiary level. Hence investing in female education today will not only empower females today but as a positive externality will also lead to gender equity in educational outcomes in the future. Besides this intergenerational externality of investment in female education, the finding establishes that when conditional cash programmes are targeted at mothers as a policy tool they become an effective measure in increasing current female enrolment. Moreover the case for reducing gender disparities in educational outcomes is further supported when we see how gender imbalance in educational attainment and female labour force participation lead to discrepancies in the private rate of return to education by gender. The varied estimates of private rate of returns to education for males and females show that such deviations arise because the females labour force on average is much less educated than males and hence if the object is to raise the rates of returns, a targeted policy for reducing gender differences in enrolment at all levels of education primary, secondary and tertiary will have to be implemented.

Returns to Education in India: Some Recent Evidence

This paper estimates returns to education in India using a nationally representative survey. We estimate the standard Mincerian wage equation separately for the rural and urban sectors. To account for the possibility of sample selection bias, Heckman two-step procedure is used. The findings indicate that returns to education increase with the level of education and differ for rural and urban residents. Private rates of return are higher for graduation level in both the sectors. In general, the disadvantaged social groups of the society tend to earn lower wages. We find family background is an important determinant affecting the earnings of individuals. Using quantile regression method, we show that the effect of education is not the same across the wage distribution. Returns differ considerably within education groups across different points of the wage distribution. Returns to education are positive at all quantiles. The results show that the returns are lower at the bottom quantiles and are higher at the upper quantiles.

How Do Marital Status And Gender Affect The PRR To A University Degree In Australia?

While Australian evidence suggests that the Private Rate of Return (PRR) to a university degree in Australia has gradually declined with increases in the cost of higher education, these studies have only measured the PRR for the average male and average female. This paper uses income data from the ABS Income and Housing Survey (2003-04) CURF to measure the impact of the 2005 increase in HECS fees on the PRR based on gender and marital status. This paper shows that the return to a university degree is largely affected by both gender and marital status and studies that measure the PRR to a university degree for single males and single females with no dependent children underestimate the PRR for most male graduates and overestimate the PRR of female graduates.

Earnings expectations of typical South African university of technology first‐year students

Human capital theory holds that a higher education will be pursued to the extent that its pecuniary rewards outstrip its costs. This notion is founded on the neoclassical economic assumption that expected earnings conditional on educational investment are accurately anticipated by those considering such investments. However, the evidence in support of this thesis is slim and, in the case of South Africa in particular, remains largely untested. This paper – the product of a qualitative study – reports the expected earnings data of Durban University of Technology first‐year students who, on the whole, are evidently able to relatively accurately predict their commencing and medium‐ to long‐term earnings. This merited the computation and analysis of expected private rates of return to educational investments which were found to be significantly related to study field and parents’ educational attainment, useful knowledge in any description of higher education demand. More importantly, though, the paper argues, possibly somewhat controversially, that human capital theory may offer a more plausible explanation of individual higher education choice if it is unconstrained by its neoclassical economic framework.

The Private Rate of Return to an Economics Degree; An Update

The paper reports estimates of the private rate of return to Economics, Law and Business degrees using the same methodology as applied to four earlier Census years in an earlier paper. It shows that investment in these degrees generates a good return for individuals though the return has declined somewhat since 2001 for Economics and Law. Of the three degrees studied here an Economics degree generates the highest return for males. For females the rates of return estimated were lower than for males and the rate of return on a Law degree was highest. In the light of the declining completions in Economics, this paper offers some evidence which can be used to encourage students to study more Economics.

Industrial Research versus Development Investment: The Implications of Financial Constraints

Industrial research and development (R&D) activities constitute an important driver of economic competitiveness. The impact of R&D on productivity at the firm level stems from the implementation of newly generated knowledge and technological discoveries into new products, processes or services. Particularly the 'R' component of R&D has been found to drive productivity at the firm level. That is firms that invest a larger fraction of their total R&D on research (relative to development) are more productive both in terms of the production of new knowledge, e.g. patens as well as overall factor productivity. However, economic theory suggests that two types of market failure affect private investments in research. First, private rates of return from research activities are smaller than social rates of return because of the incompleteness of appropriability of the knowledge that is being created by investment. Second, especially for (basic) research firms may face difficulties in attracting external investors or get bank loans for financing these activities. Complexity, specificity and outcome uncertainty of such investment projects may make it particularly difficult for outsiders to judge the expected return of 'R' projects. Hence, for firms with limited internal liquidity R&D investments may therefore be constrained. If information asymmetries are larger for 'R' than for 'D' financing constraints may be more binding for 'R' projects. Underinvestment in 'R', however, may result in a noticeable slowdown in productivity growth and consequently have particularly detrimental effects on technological progress and economic development. Previous studies on financing constraints for R&D do not explicitly distinguish between the different components of R&D. This article explicitly takes the heterogeneity of the two components into account. We argue that financing development 'D' externally should be less critical than it is for industrial research 'R'. First, our results show that firms’ investment in 'R' are more sensitive to liquidity than investments in 'D' indicating that firms have to rely even more on internal funds for financing the former type of activities. This may be due to the fact that the latter occurs later in the R&D process and is closer to yielding returns. That is, firms cut 'R', before they reduce 'D' if they have to allocate scarce internal funds. This has implications for R&D policy. If financial constraints for R&D are driven by the 'R' component, industrial research projects may deserve special support. Second, we show that public subsidies directed at 'R' indeed alleviate financing constraints.

Évaluation économique des programmes de remplacement de la main d’oeuvre expatriée dans les pays en voie de développement : étude du cas de la Côte-d’Ivoire

This study addresses several problems of educational policy posed by the replacement of highly skilled expatriates in the Ivory Coast's labor force. Conceptualizing expatriate replacement as an import-substitution activity in which Ivorian labor substitutes for previously imported labor services, the authors apply a modified Domestic Resource Cost (DRC) analysis to evaluate Ivorian secondary and university educational programs necessary to train the local labor. This methodology, along with more conventional cost-benefit approach, confirms that education is economically desirable in the Ivory Coast and that resource allocation to the upper secondary level is especially warranted. Lower secondary education is useful in so far as it performs a conduit function for higher levels of training. The importance of university education will probably increase as the occupational-educational structure is upgraded through technological development. Finally, consideration should be given to instituting a system of tuition charges in order to equate social and private rates of return in upper secondary and university education.

A Critique of Human Capital Formation in the U.S. and The Economic Returns to Sub-Baccalaureate Credentials

This article explores the history of human capital in the United States in relation to scholarly study of the private economic returns to higher education. The focus of this study is the private economic returns to subbaccalaureate education in two-year community and technical colleges. This article argues that although there are some beneficial private rates of return to a subbaccalaureate credential in relation to having no higher education, the benefits are small and often insignificant, especially in relation to the rates of return to a baccalaureate degree. Thus, subbaccalaureate credentials are devalued economic commodities that perpetuate the inequality of U.S. society and the labor market and, therefore, subbaccalaureate education should not be seen as a means to democratize higher educational access, but more as an advanced type of secondary schooling.