Earnings Returns to Different Educational Careers: The Relative Importance of Type vs. Field of Education

• Published in: IDEAS Working Paper Series from RePEc
• Main Authors: Pfister, Curdin, Simone Tuor Sartore, Backes-Gellner, Uschi
• Format: Paper
• Language: English
• Published: St. Louis Federal Reserve Bank of St. Louis 01.01.2015
• Subjects: Earnings; Education

The two choices that students in many Western European countries must make during their educational career are the type of education (vocational vs. academic) and the subject area (the specific field of education). However, most studies on the effect of education on earnings consider only one of these two factors. In addition, most of these studies focus exclusively on average returns and neglect the variance of the returns, thus overlooking important aspects of the nature of the returns to education such as the risk in human capital investments. In this study, we consider both factors type of education and subject area at the same time to estimate earning returns and to examine how much these two factors contribute to the variance of earnings in later careers. We use the Swiss Adult Education Survey from 2011 and construct a sample of individuals with tertiary level educational degree, estimating earnings regressions and decomposing the variance in earnings for type of education and subject area. Decomposition results show that field of education, relative to subject area, explains double the variation in earnings. Given our findings that earnings relate more to subject area than to type of education, the question of which type of education--academic or vocational--an individual chooses is less relevant than the question of which field he or she chooses to specialize in.