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The Returns to Postgraduate Education

Fumihiko Suga

ESRI Discussion paper series from Economic and Social Research Institute (ESRI)

Abstract: This paper aims to estimate the returns to postgraduate education in Japan, taking potential self-selection bias due to the absence of information on academic ability and the business cycle into consideration. The effect of earning a master's degree on wages is estimated using Japanese Panel Survey of Consumers (JPSC) data that contains extensive information on individuals' undergraduate subjects and type of university (private or public). The estimates using ordinary least squares (OLS) and Heckman two-step estimation respectively indicate that postgraduate wage premiums in Japan are 25.0% and 26.4% for men and 23.7% and 24.7% for women. The estimation results suggest that workers’ undergraduate subject and type of university (private or public) explain only a small fraction of the postgraduate wage premium. Moreover, in order to account for the self-selection bias, graduate enrollment capacity is employed as an instrumental variable (IV). In the IV regressions, the estimated postgraduate wage premium is not statistically significant. The estimates are not significant even in the regression using Working Person Survey (WPS) data, which has a much larger sample size than the JPSC. Although IV regressions of log wage do not provide positive and statistically significant results, the estimated effect of postgraduate education for male workers on job satisfaction is positive and statistically significant. It indicates that Japanese males obtain a master’s degree not for higher wage, but for non-pecuniary benefits.

Pages: 32 pages
Date: 2017-03
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