Returns to education - individuals

Study of the ‘returns to education’ has been one of the most productive areas of research in labour economics for the last seven decades and it is very likely that it will continue to be a major topic in the future. Understanding how and why investments in education impact upon later economic outcomes, and more precisely quantifying the ‘return’, is important for a range of questions relevant to both policymakers and individuals. Moreover, beyond the labour market, the ‘returns to education’ literature has expanded to consider the impact of education on outcomes in a variety of additional domains. This chapter first reviews the theoretical foundations of the ‘returns to education’ literature and key considerations for the implementation of the canonical model. It then surveys the empirical evidence on the private financial return to education and the impact of education on other life outcomes. The final part of the chapter considers the current research frontier in this literature and likely directions for future research. The primary pathway is expected to be the further development and estimation of models that are better able to characterise the education investment decision and relax the numerous strong assumptions embedded in the canonical model. An additional pathway is the continued development of research that addresses questions broadening the concept of the ‘returns to education’ into areas that are yet to be fully explored in the existing literature.