External return to education in Europe
External return to education in Europe

Summary/Abstract: In the literature, social return to education is defined as the sum of human capital return and external return. The novelty of this study is that it provides an international comparison of external return to education. Many authors claim that the social return rate exceeds the pure technical rate of return by a considerable margin. However, measurement of social return is challenged methodologically and by data problems. The approach employed in this study is based on comparative advantage theory which allows control for potential endogeneity and self-selection into different streams of education. External return was found to be positive in all European countries although magnitudes varied. The external return was greater in smaller economies where there was a smaller proportion of highly educated people.

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