Measuring the value of externalities from higher education
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This paper takes an innovative approach. We have used the idea of converting international evidence of the size of higher education externalities as a proportion of GDP into Australian-specific dollar equivalents and added these estimates to estimates of lifetime fiscal returns to graduates. This allows us to estimate the expected spillovers over a graduate’s lifetime, an opportunity that has so far not been taken elsewhere. We conclude that an additional year of higher education in an Australian context, valued at the time of a student’s enrolment, lies between $10,635 and $15,952 in 2014 terms. We also acknowledge that it is difficult and inappropriate to apply estimates of average externalities to issues related to public sector pricing. However, having some idea of the boundaries of the potential sizes of higher education spillovers is a valuable and interesting exercise.
KeywordsHigher education financing Higher education externalities Higher education policy Higher education subsidies Fiscal externalities
We are grateful to the Australian Research Council for financial support with Linkage grant number LP 110200496. A version of this paper was originally prepared for the Higher Education Base Funding Panel on behalf of the Australian Government Department of Education, Employment and Work Place Relations, and we are grateful for their permission to publish the research. We acknowledge also the valuable input of several referees, one of whom made exceptionally productive suggestions. This paper uses unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Australian Government Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and views reported in this paper, however, are those of the authors and should not be attributed to any Australian Government Departments or the Melbourne Institute. Errors, omissions and the views expressed are those of the authors only.
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