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ERIC Number: ED505310
Record Type: Non-Journal
Publication Date: 2002-Jun-26
Pages: 54
Abstractor: As Provided
Reference Count: 24
ISBN: ISBN-0-6623-3428-0
Rate of Return to Education: A Distributional Analysis Using the LifePaths Model
Boothby, Daniel; Rowe, Geoff
Human Resources Development Canada
This paper reports estimates of the distribution of individual private rates of return to undergraduate and community college education by field of study for Canada. It is important to know the dispersion of the private rate of return to post-secondary education, as well as its average level. There are very different implications for educational policy and for individual educational decisions if, for example, 40% of post-secondary graduates have negative private rates of return to their educational investment than if 10% have negative rates of return, whatever the mean level of the private rate of return. To our knowledge, there is no previous research reporting estimates of the distribution of individual private rates of return to education. Individual rates of return were derived by comparing simulated lifetime earnings streams of pairs of individuals. Each pair was made up of a post-secondary graduate and a high school graduate "clone". The simulations were carried out using the LifePaths model of Statistics Canada. Our principal finding is that there is a very wide range of outcomes, as measured by individual rates of return, within each level of study and within fields of study. The range of individual rates of return within fields of study was much wider than the range of median rates of return among fields of study within a level of study, although fields of study varied greatly in their median rates of return. The variability in rates of return was greater at the community college level than at the university undergraduate level. Median rates of return to the bachelor's degree were 12% for men and 13% for women; for community college diplomas the median rates of return were 16% for men and 18% for women. Twenty percent of bachelor's degree graduates and thirty percent of community college graduates had negative rates of return to their investment in post-secondary education. Median rates of return by field of study and gender ranged from 5% to 23% at the undergraduate level and from 0% to 20% at the community college level. In fields of study where male and female graduates could be compared, women had higher rates of return to post-secondary education, but lower lifetime earnings. We also compared distributions of lifetime earnings for male and female post-secondary and high school graduates. Median lifetime earnings for female and male graduates with postsecondary degrees are greater than lifetime earnings at the 75th percentile for female and male high school graduates. (Contains 11 figures, 1 table and 34 footnotes.)
Human Resources Development Canada. Service Canada, Ottawa, ON K1A 0J9, Canada. Tel: 1-800-926-9105; Fax: 613-941-1827; Web site:
Publication Type: Reports - Research
Education Level: Higher Education; Postsecondary Education; Two Year Colleges
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: Human Resources Development Canada, Applied Research Branch
Identifiers - Location: Canada