Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2006:11: Mind the gap? Estimating the effects of postponing higher education

Bertil Holmlund (), Qian Liu () and Oskar Nordström Skans ()
Additional contact information
Bertil Holmlund: Department of Econoics, Uppsala University, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Qian Liu: Department of Economics, Uppsala University, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Oskar Nordström Skans: IFAU - Institute for Labour Market Policy Evaluation, Postal: P O Box 513, SE-751 20 Uppsala, Sweden

Abstract: This paper estimates the effects on earnings of “gap years” between high school and university enrollment. The effect is estimated by means of standard earnings functions augmented to account for gap years and a rich set of control variables using administrative Swedish data. We find that postponement of higher education is associated with a persistent and non-trivial earnings penalty. The main source of the persistent penalty appears to be the loss of work experience after studies. Two years postponement reduces the present value of life time earnings by 40-50 percent of annual earnings at age 40.

Keywords: timing of education; schooling interruptions; work experience

JEL-codes: I23; J24; J31

45 pages, October 11, 2006

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