SSE/EFI Working Paper Series in Economics and Finance
No 430:
On the Adjusted Rate of Return to Womenfs University Education: A Preliminary Study of OECD Countries
Hiroshi Ono ()
Abstract: It is a well known fact that on average, women in all
countries earn less than men. Although less pronounced among OECD
countries, the fact remains that the gender gap in earnings still persists
to a significant degree. Less well known is that the rate of return (ROR)
to university education is larger for women than men among most OECD
countries. This higher ROR may partly explain the general pattern that
there are more women than men enrolled in universities among these
countries.
This paper introduces an eadjustedf rate of return to
womenfs university education. The adjusted ROR is estimated by comparing
the earnings of female university graduates to the earnings of male high
school graduates. Results from a comparison of seventeen OECD countries
reveal that the overall average of the adjusted ROR is actually negative:
On average, female university graduates earn less than male high school
graduates. My analysis also finds that womenfs enrolment in university
education can be better explained by the adjusted than the true ROR. In
other words, womenfs economic incentives for pursuing university education
is shaped by both the magnitude of the premium obtained from university
education, and the gender gap in earnings. These findings present a classic
case in which theory departs from practice. Although the true ROR may stand
on firmer ground in theory, in practice, women are more responsive to the
adjusted ROR which reveals a more realistic scenario of where women stand
relative to men.
The adjusted ROR may be a helpful measure in policy
analysis, both in broadening the perspectives of ROR estimations, and in
future discussions which involve gender equality in education and labour
market outcomes. Because of the limitations of data available in
international comparisons, the research is still in its rudimentary stages.
The full paper first guides the reader through interpretations and
implications of the basic statistics. This section is followed by a
theoretical discussion of the adjusted ROR, estimations of the adjusted ROR
using OECD statistics, a more detailed analysis of the concept using Japan
as an illustrative case, and a discussion concerning the relationship
between the adjusted ROR and womenfs enrolment in university education.
The paper concludes by exploring possibilities for future research in
further developing the concept of the adjusted ROR.
Keywords: human capital; returns to education; gender inequality; (follow links to similar papers)
JEL-Codes: I22; J16; J24; J31; N30; (follow links to similar papers)
34 pages, February 9, 2001, Revised August 1, 2001
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