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Private Returns to Tertiary Education - How Does New Zealand Compare to the OECD?to the OECD?

Publication Details

  • Private returns to tertiary education - How does New Zealand compare?
  • Published: 16 Jul 2013
  • Status: Current
  • Author: New Zealand Institute for Economic Research (NZIER)
  • Pages: (2),v,46
  • ISBN: 978-0-478-40350-3 (Online)
  • Ref. No: WP 13/10
  • Pub. type: Working Papers
  • Responsible units: Tax Strategy
  • Copyright: © Crown Copyright
  • JEL Classification: B49; J24; J31; J38
 

Private Returns to Tertiary Education - How Does New Zealand Compare to the OECD?

Published 16 Jul 2013

Authors: James Zuccollo, Sholeh Maani, Bill Kaye-Blake and Lulu Zeng

Abstract

How do private returns to tertiary education in New Zealand compare internationally? According to the latest OECD measures, the private rate of return for New Zealand is 8.9%, compared to an OECD average of 12.4%, placing New Zealand toward the bottom of the OECD ranking. The aim of this study is to better understand the reasons for that gap and determine whether the low returns could be considered as problems amenable to policy interventions. We identify a number of measurement issues with the OECD standardisation. We develop a decomposition approach and provide a series of decompositions of the New Zealand-OECD gap. Our analysis shows that about half of the gap in New Zealand’s private returns can be explained by the way OECD private tertiary returns are measured (eg, old tax rates, New Zealand’s higher employment rates, and compositional issues which have not been controlled for in the OECD analysis such as the mix of degrees and graduates in New Zealand) rather than a "real" gap. However, once those factors are taken into account there remains a gap between New Zealand and the OECD average. We identify a number of endowment, policy, and decision-related contributing factors, and identify directions for future research.

This Working Paper is available in Adobe PDF and HTML. Using PDF Files

Contents

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Executive Summary

1 Introduction

2 Components of the OECD’s findings

3 A framework for dissecting gross earnings

4 Empirical evidence on factors influencing the wage premium

5 Conclusions and Future Research

Appendix A - Measurement issues

Appendix B - Results from adjusting the OECD measure of private returns

Appendix C - Literature search strategy

Appendix D – References

twp13-10.pdf (732 KB) pp. 1–43

Acknowledgements

This paper was prepared at NZIER and the University of Auckland. It was quality approved by John Stephenson (NZIER). The assistance of Sarah Spring, Paul Gini, Julia Pearce, Roger Smyth, Sylvia Dixon, and all those who participated in discussions and provided comments on earlier drafts is gratefully acknowledged. We also wish to thank Xingang Wang for research assistance.

Disclaimer

The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

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