OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Determinants of Tertiary Graduations

This paper proposes and estimates a model of demand for and supply of graduations in tertiary education, which is then used to construct forward-looking scenarios for graduation rates by country. Consistent with evidence that economic returns to education have remained high in spite of rising educational attainment levels, the paper accords a great deal of attention to developments in gross earnings at various levels of the earnings distribution, though other factors are also accounted for. The analysis shows that demand for tertiary graduations increases in per capita incomes, wage differentials between high and medium earners, and PISA scores. Supply of graduations increases in tuitions and (to a lesser extent) government funding, but also in the share of students enrolled in private institutions and PISA scores. Based on the OECD 50-year scenarios for per capita incomes and earning inequalities (Braconier et al., 2014), the estimated model is used to generate future scenarios of demand for tertiary education, pointing to increases between 30 and 60 per cent across OECD countries over the coming 50 years. Such large increases in demand would put pressure on the supply, either requiring substantial additional government spending or a major shift towards tuition funding across OECD countries.


Keywords: rate of return, models with panel data, education
JEL: H52: Public Economics / National Government Expenditures and Related Policies / Government Expenditures and Education; J24: Labor and Demographic Economics / Demand and Supply of Labor / Human Capital; Skills; Occupational Choice; Labor Productivity; I2: Health, Education, and Welfare / Education and Research Institutions
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