Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/215675
Authors: 
Pfeiffer, Friedhelm
Stichnoth, Holger
Year of Publication: 
2020
Series/Report no.: 
ZEW Discussion Papers 20-016
Abstract: 
Based on a detailed model of the German tax-benefit system, this paper simulates private and fiscal returns to education for college graduates and college dropouts. Completing a five-year college degree is found to be associated with an internal rate of return (IRR) of 14.2% for gross earnings, 7.4% for disposable income, and 6.6% for the net fiscal contribution. Individuals who drop out of college after two years, and subsequently complete a three-year period of vocational training, are found to have negative IRRs: -0.5% for gross earnings and -5.9% for both disposable income and the net fiscal contribution. In a series of counterfactual experiments, we explore how these returns react to changes in gross earnings, expenditure per student, and the level of income tax payments.
Subjects: 
University education
graduation
dropouts
taxation
internal rate of return
JEL: 
I26
I28
H23
J31
Document Type: 
Working Paper

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