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Labor-market returns to postsecondary education in Europe and the United States

Final Report Summary - PSE RETURNS (Labor-market returns to postsecondary education in Europe and the United States)

This project provides new evidence regarding the labor-market returns to postsecondary schooling in Europe and the U.S. It does this through three research topics.

The first research topic concerns the General Educational Development (GED) test, and it is joint work with Peter Mueser (University of Missouri) and Kenneth Troske (University of Kentucky. The GED test is designed to be equivalent to graduating high school and therefore is taken by U.S. high school dropouts. Our first paper on the GED, “Labor-Market Returns to the GED Using Regression Discontinuity Analysis,” was published in Volume 124, Issue 3, pages 621-649 by the Journal of Political Economy in 2016. The second paper, “Second Chance for High-school Dropouts? A Regression Discontinuity Analysis of Postsecondary Educational Returns to the GED,” was published in Volume 35, Issue S1, pages S273-S304 of the Journal of Labor Economics in 2017. Both papers use a technique called regression discontinuity analysis to compare individuals who barely pass the GED with those who barely fail. We find that passing the GED has no discernable effect on employment and earnings. GED recipients are more likely to attend postsecondary education, usually at community colleges. However, GED recipients obtain an average of at most six more credits (i.e. 1-2 courses). Future work should focus on why GED recipients leave postsecondary institutions before obtaining sufficient schooling to improve their labor-market outcomes.

In the second research topic, Peter Mueser, Kyung-Seong Jeon (both University of Missouri), and I study the labor-market returns to proprietary (also called for-profit) schooling in the United States. We have written one paper so far on this topic, “The Benefits of Alternatives to Conventional College: Labor-Market Returns to Proprietary Schooling.” We published a working paper version of this paper as part of the IZA discussion paper series in June 2016, and the paper is under review at an economics journal (as of October 2017). We have presented this paper at numerous conferences and universities. The main result of this paper is that individuals who attend for-profit colleges have higher earnings and employment after attending these colleges relative to before. We also show that previous studies in the literature do not model the returns correctly. Using their technique and our data would lead to incorrect (and lower) estimated returns, implying that previous work in this area likely underestimates the benefits of for-profit colleges. Although women receive lower returns than men, this difference is entirely explained by gender differences in field of study. Women predominantly study health, a low-return field in our data, whereas men are more likely to study areas such as computing with higher returns.

The third and final research topic regards the labor-market returns to vocational postsecondary schooling in Finland. This project is a collaboration with Petri Böckerman (Turku School of Economics, Labour Institute for Economic Research and IZA) and Mika Haapanen (University of Jyväskylä, School of Business and Economics). We have revised and submitted one paper on this topic, “More Skilled, Better Paid: Labor-Market Returns to Postsecondary Vocational Education” to an economics journal in 2017. We have written a second paper, “Back to School: Labor-Market Returns to Higher Vocational Schooling,” that will be submitted to an economics journal in autumn 2017. The first paper studies the returns to vocational education at the bachelor’s level, whereas the second paper studies the master’s level. Both papers use extensive registry data to follow students and a matched set of non-students over many years in order to compare labor-market outcomes between the two groups. For both levels of education, vocational school attendance is associated with improved earnings and, to a lesser extent, employment.

Christopher Jepsen, School of Economics, University College Dublin