Returns to education: evidence from the UK -PhD thesis-

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Lei Xu

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This thesis consists of three independent chapters which address separate questions in relation to labor economics and economics of education. Wage Penalty of Vocational Education: Evidence from the UK (Chapter 3): In this chapter, I examine the difference in wages between academic and vocational education in the UK based on Quarterly Labor Force Survey (QLFS) from 2001 to 2013. First I examine the crude wage differences between vocational and academic education. To further test the differences between two types of education, I examine the effect of the education expansion on the returns to higher levels of vocational qualification, based on the difference-in-difference (DID) methodology. The results suggest that the reform has negative effects on the wage of holders of higher levels of vocational education. The penalties vary considerably, depending on the type of vocational qualification. Does age-dependent minimum wage affect employment? evidence from UK (Chapter 4): The chapter studies the age-dependent minimum wage in the UK, which is used to regulate the flow of young workers into the labor market. In this chapter, I examine the employment effect of becoming eligible for higher minimum wage rate by applying Regression Discontinuity (RD). The results suggest that an increase in the minimum wage has a positive effect on employment probability for higher skilled worker covered by the minimum wage but not for lower skilled workers, and it may also lead to crowding out effect coming from higher skilled workers. Moreover, higher skilled workers tend to transfer from a temporary job into a formal job more easily after becoming eligible for higher minimum wage rate and this pattern is the opposite for lower skilled workers. The evidence suggests that the labor market in which the minimum wage prevails is very competitive during the recession and lower skilled workers may bear the cost of competition due to the discontinuity caused by age-related increases in minimum wage. Quantitative effects of higher education expansion on the returns to education: Evidence from the UK (Chapter 5): This chapter studies the effect of the education expansion on the returns to education based on Quarterly Labour Force Survey (QLFS) and Understanding Society. After examining the heterogeneous returns, I apply the difference-in-difference (DID) methodology to examine the effect of the education reform on the returns and the matching Difference-in-Difference (MDID) methodology to account for the compositional change across cohorts since those newly recruited university graduates after the reform might be different from the previous graduate cohorts. Newly recruited university graduates consist of “fresh students” who entered universities as school leavers typically with A-level and workers with several years of work experience called “mature students”. The MDID results show that the expansion of higher education mostly reduces the returns for fresh students and it mostly appears in the post-expansion period. The mature students have more stable returns compared with fresh students.


Education, Labour Economics, Economics, Wages And Earnings and Higher Education