What are the main determinants of investment in tertiary education?
The individual incentives to invest in higher education essentially consist of a higher future stream of earnings after graduation, often called wage premia (Becker 1967). In OECD countries, wage premia are close to 55% over secondary educated workers, ranging from around 20% for Spanish men and 30% for Austrian women to above 100% for both men and women in Hungary (Strauss and Maisonneuve, 2007). A more comprehensive measure of incentives to undertake higher education is obtained by adjusting wage premia by a number of factors (taxation, employment probability, unemployment benefits, tuition fees, and opportunity costs of studying). The resulting calculation is the internal rates of return to education (Figure 2), which, from a life-cycle perspective, can be interpreted as the discount rate that equates the future benefits with the costs of higher education (Boarini and Strauss, 2007). These rates vary from over 4% to nearly 14% in 2001 for the 21 OECD countries covered by our analysi
