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

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Author: Pfeiffer, Friedhelm; Stichnoth, Holger


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 per cent for gross earnings, 7.4 per cent for disposable income, and 6.6 per cent 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 per cent for gross earnings and -5.9 per...  [+] Show more

Subjects: Finance; Higher education; Outcomes; Income

Keywords: Educational expenditure; Return on education and training; Taxation; Graduates; Completion; Dropout; University; Wage differential

Geographic subjects: Germany; Europe

Published: Mannheim, Germany: Centre for European Economic Research, University of Mannheim, 2020

Physical description: 13 p.

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Series: ZEW discussion paper; no. 20-016

Resource type: Discussion paper

Call number: TD/TNC 140.577

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