Labour market returns to higher education: An empirical analysis of marginal students Evidence from BI Norwegian Business School

Abstract

This thesis targets the returns to higher education in Norway, respectively if a selection of students experienced positive labour market gains from graduating. The selection refers to bachelor students in business-administrative fields at BI Norwegian business school, where comparing students from different parts of the skill-distribution is our main area of study in an attempt to determine who benefits the most from taking an academic degree. Correspondingly, we compare marginal students to non-marginal students; using below or above the threshold of 3.5 in average high school grade points. To conduct the analysis, we merged internal BI student-registers with data from Statistics Norway, providing insight into the students’ actual labour market gains from graduating between the year 2003 and until 2012. We perform a regression analysis controlling for different variables and their individual effect on our key dependent labour market variables; Wage and Employement. In addition, we use an instrumental variable approach to study the effect of the Progression requirement, a measure introduced in 2006, in an attempt to reduce the share of bachelor dropouts. Our main findings point to the fact that completing a bachelor degree at BI has a positive impact on both wage and employment; graduating before the age of 25 increased wages and degree of employment, at age 25, with respectively 62% and 13%, compared to the reference group whom never graduates. Further, when studying the marginal and non-marginal students separately, we found that both groups indeed experience higher wages from graduating. However, there is seemingly evidence of a stronger relationship between graduating on wages for the non-marginal students; graduating before turning 25 led to 68% higher wages at age 25, compared to 49% for the marginal students. Thus, our results do point to a case of positive selection. Finally our IV-estimates, investigating the effect of the Progression requirement, proved that it for a fact increased student quality by resulting in a 29% higher share of graduates, and in turn causing a 20% wage growth for the 25 year olds. Keywords – Educational Economics, labour economics, Marginal students, BI