The returns to an additional year of education for college graduates
June 5, 2024
As the academic year comes to a close, final-year undergraduate students find themselves at a crossroads – having to decide between pursuing graduate education, securing a job, or exploring other paths. Some third-year students might even forgo the fourth year of undergraduate education due to personal reasons or due to ineligibility to continue in the programme.
In the study, ‘The returns to an additional year of education for college graduates’ (Journal of Public Economics, 2023), Professor Jessica Pan (NUS Economics) and Associate Professor Jie Gong (HKU Business School) assess the benefits associated with pursuing an extra year of undergraduate education for students who will graduate with a bachelor’s degree. The study is done using a regression discontinuity design, capitalising on the grade-based requirement for students in certain faculties to progress into their fourth (or honours) year.
Through evaluating datasets provided by the National University of Singapore, including a combination of administrative student records and survey data on earnings, Prof. Pan and A/P Gong find that students with grades that just exceed the threshold for progressing to the honours year have a significantly higher likelihood of completing that year. As a result, these students experience higher post-graduation earnings as compared to those who narrowly miss the grade requirement.
The estimated earnings return to the additional year of undergraduate education stands at approximately 12% six months after graduation. Furthermore, an examination of the administrative tax data also shows sustained growth in earnings for at least four years after graduation. Prof. Pan and A/P Gong also find that the difference in return remains even after the university reduces this grades-based threshold. The study’s findings thus provide insights into how universities ought to structure their education policies to improve students’ labour market prospects and reap the economic benefits of being university graduates.
Read the article here: https://doi.org/10.1016/j.jpubeco.2022.104796
