Working Paper Series, Swedish Institute for Social Research, Stockholm University
Upgrading the Low Skilled: Is Public Provision of Formal Education a Sensible Policy?
Abstract: At various political levels, including the OECD and the
EU, it is repeatedly emphasized that upgrading the low skilled is an
important area for the economic and social development of modern societies.
Employers are typically reluctant to train low skilled, who in their turn
are unwilling to participate due to financial constraints or a perception
of low quality and/or returns to training. If this is a market
imperfection, a possible remedy is suggested by public provision of formal
education where enrollees are eligible for financial support. However, the
costs may be large and the economic returns to formal adult education (AE)
for low skilled, a crucial measure to assess if expenses should be
increased or decreased, is a virtually unexplored issue. This study uses
Swedish register data 1990-2004 of low skilled siblings aged 24-43 in 1994
to estimate difference-indifference- in-differences models which include
family fixed effects. It is found that a year of AE improves earnings by
4.4 per cent, but calculations indicate that the private returns alone only
roughly cover the costs incurred by society, implying that social returns
to AE are needed to justify the expenses.
Keywords: Human capital; adult education; earnings; (follow links to similar papers)
JEL-Codes: H30; H52; I20; J24; O30; (follow links to similar papers)
37 pages, January 19, 2009
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