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This paper reviews evidence that a greater education causes better outcomes in life, over and above the effects of having a higher-paying job. Comparatively little has been written which draws together evidence on the wider (that is, wider than just earnings-related) benefits of education, although studies which ignore these benefits might considerably underestimate the total return from a additional year of education or an additional qualification. Research suggests that increased education, as measured by the time people spend in formal education or the qualifications they attain, may cause a reduction in cigarette smoking, anxiety disorders, anti-social disorders, suicide, crime, teenage pregnancies, unemployment and reliance on welfare benefits, at least when these outcomes are measured in young adulthood. Education may also have an effect on people’s health. The wider benefits of education are difficult to quantify, however, and the degree of uncertainty around them is considerable. Policy-makers would be unwise to rely too heavily on the existence of wider benefits when making decisions about public investment in education.
I would like to thank Dean Hyslop, in particular, for patient discussions of methodology, and Bronwyn Croxson, Nick Mays, Simon Chapple, Peter Wilson, Ron Crawford, Veronica Jacobsen, Martin Connelly and Helen Walter for their helpful comments which greatly improved the quality of this paper.
I am also indebted to the staff of the Treasury library for obtaining countless articles and books for me, not all of which made it into this review.
The views expressed in this Working Paper are those of the author(s) and do not necessarily reflect the views of the New Zealand Treasury. The paper is presented not as policy, but with a view to inform and stimulate wider debate.