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

Friedhelm Pfeiffer and Holger Stichnoth

No 20-016, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: 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.

Keywords: University education; graduation; dropouts; taxation; internal rate of return (search for similar items in EconPapers)
JEL-codes: H23 I26 I28 J31 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Fiscal and individual rates of return to university education with and without graduation (2021)
Working Paper: Fiscal and individual rates of return to university education with and without graduation (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:20016

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