Does a master’s degree at BI generate added value for a bachelor’s graduate?

Abstract

The aim of our master thesis is to investigate whether taking a master’s degree at BI Norwegian Business School generates added value in terms of lifetime salary earnings for a bachelor graduate. In addition, we plan to interpret and examine the main contributing factors that give the student the added value from attending the master’s degree at BI. By performing an empirical study and creating our own tailor-made NPV model that is well-suited to a BI student, we found out that attending a master’s degree contributes to an added value by generating a positive NPV of NOK 3.5 million. We also analyze the importance of the key variables contributing to the added value by formulating a regression model to study the impact of different factors on educational returns (i.e. salary). Consequently, we found out that ‘Master program’, ‘Age’, ‘Male’, ‘Grade’, ‘EFCAB’ and ‘TESLO’ are the most significant variables that explain the added value to the starting salary of BI graduates. Simultaneously, we acknowledge that there is a concern of endogeneity in our analyses and that this could lead to a bias in our results, meaning that the key dependent variable ‘salary’ and the independent variable “Master program” could be influenced by other unobservable endogenous variables such as human capital. This could impact not only the student’s decision whether he/she should attend a master’s program, but also impact his/her starting salary at a later stage. Despite this concern, we believe our findings and results give valuable insights into the valuation of a master’s degree. In conclusion, our thesis suggests that pursuing a master’s degree at BI is a profitable and worthy long-term investment for students and therefore, we recommend that bachelor students should invest their time and effort in a 2-year master’s program for lifetime value creation.