The returns to postgraduate education in Japan
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The returns to postgraduate education in Japan Fumihiko Suga1 Received: 19 June 2018 / Revised: 7 February 2019 / Accepted: 8 February 2019 © Japanese Economic Association 2019
Abstract Using three household surveys, the Japanese Panel Survey of Consumers (JPSC), the Working Person Survey (WPS), and the Survey of Adult Skills (PIAAC), this study estimates the returns to postgraduate education in Japan, considering potential self-selection bias. To mitigate the bias, workers’ undergraduate majors, types of university, and level of cognitive skills are controlled for. These factors explain 6.3– 29.2% of the postgraduate wage premium for women, but at most 10.9% for men. Even after controlling for them, the postgraduate wage premium remains positive and significant, ranging from 16.5 to 23.7% for men and 13.5–26.4% for women. Keywords Rate of return · Postgraduate education · Wage premium JEL Classifications I21 · I23 · J24 · J31
1 Introduction Over the last 3 decades, the college enrollment rate has almost doubled in Japan. This dramatic change significantly influenced the labor market. Previous studies (e.g., Arai et al. 2015; Kawaguchi and Mori 2016) found that the increase in the college-educated workers’ share plays a key role in explaining the transition in the Japanese labor market. At the same time, the number of graduate students in Japan has also increased substantially over the past few decades. Figure 1, which presents the number of students enrolled in master’s programs in private and public universities, illustrates this trend: graduate enrollment followed a steady upward trend from the 1970s until the first decade of the twenty-first century, although this trend has declined to a certain extent in recent years reflecting overall population trends. If graduate education imparts useful skills and knowledge to students and increases their productivity, the increase in the number of graduate students should * Fumihiko Suga [email protected] 1
Graduate School of Economics, Kyushu University, 744 Motooka Nishi‑ku, Fukuoka 819‑0395, Japan
Published online: 9 May 2019
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The Japanese Economic Review
boost technological development and guide economic growth. However, Kucel et al. (2016) note that over-education can be high in Japan. Therefore, it is meaningful to investigate by what margin graduate education increases workers’ human capital stock. To address this question, this paper attempts to estimate the returns to graduate education in Japan, taking into account the endogeneity of graduate schooling. Recent studies by Morikawa (2015) and Kakizawa et al. (2014) reveal that the postgraduate wage premium in Japan is positive, significant, and comparable to that in the United States. The study by Morikawa (2015) was the first attempt to estimate the postgraduate wage premium for the nationally representative sample in Japan,1 and the estimation results indicate that the expansion of graduate education in Japan could affect the wages of workers with postgraduate degrees. Howe
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