Income expectations and selection to higher education

Author: Nikolay Angelov, And Per Johansson, And Mikael Lindahl, And Ariel Pihl, And
Dnr: 154/2019

The size of the monetary return to education is probably the most studied question in empirical labour market economics. The reason is that the return is considered an important financial incentive to stimulate higher education and thus, indirectly increasing the productivity in society. Analyses of the monetary return are traditionally made by using retrospective data on observed education and salaries and incomes for people who have established themselves in the labour market. To better understand how students choose education, we conducted a large survey of Swedish high school students on what they consider to be important aspects for their educational choices. This project analyses, in particular, the importance of their expected monetary return to their decision to continue with their studies. Because of the study design, we can estimate the distribution of the expected return to education in our study population. The implication is that we can study how the selection to higher education depends on different abilities, and how the importance of the expected return motivates higher studies. The project will provide us with an important piece of the puzzle in understanding how to interpret the results from studies analysing the returns to education using retrospective data on actual education and observed work income.