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

Arbeitspapier

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% for gross earnings, 7.4% for disposable income, and 6.6% 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% for gross earnings and -5.9% for both disposable income and the net fiscal contribution. In a series of counterfactual experiments, we explore how these returns react to changes in gross earnings, expenditure per student, and the level of income tax payments.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 20-016

Classification and Topics

• Classification: Wirtschaft ; Returns to Education ; Education: Government Policy ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Wage Level and Structure; Wage Differentials
• Subject: University education ; graduation ; dropouts ; taxation ; internal rate of return

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pfeiffer, Friedhelm ; Stichnoth, Holger
• Event: Veröffentlichung
• (who): ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
• (where): Mannheim
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/215675
• Last update: 10.03.2025, 11:43 AM CET