Fiscal and individual rates of return to university education with and without graduation


Pfeiffer, Friedhelm ; Stichnoth, Holger


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URL: https://madoc.bib.uni-mannheim.de/55377
URN: urn:nbn:de:bsz:180-madoc-553775
Document Type: Working paper
Year of publication: 2020
The title of a journal, publication series: ZEW Discussion Papers
Volume: 20-016
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: I26 , I28 , H23 , J31,
Keywords (English): University education , graduation , dropouts , taxation , internal rate of return
Abstract: Based on a detailed model of the German tax-benefit system, this paper simulates private and fiscal returns to education for college graduates and college dropouts. Completing a five-year college degree is found to be associated with an internal rate of return (IRR) of 14.2% for gross earnings, 7.4% for disposable income, and 6.6% for the net fiscal contribution. Individuals who drop out of college after two years, and subsequently complete a three-year period of vocational training, are found to have negative IRRs: -0.5% for gross earnings and -5.9% for both disposable income and the net fiscal contribution. In a series of counterfactual experiments, we explore how these returns react to changes in gross earnings, expenditure per student, and the level of income tax payments.

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Pfeiffer, Friedhelm ; Stichnoth, Holger (2020) Fiscal and individual rates of return to university education with and without graduation. Open Access ZEW Discussion Papers Mannheim 20-016 [Working paper]
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