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Dynamics of rate of returns for postgraduate education in Taiwan: the impact of higher education expansion

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Abstract

This paper analyzes the dynamics of rate of returns for postgraduate education and the determinants of wage premiums for postgraduate labor, especially for the impact of higher education expansions, in terms of quantity and quality, since the late 1990s in Taiwan. Utilizing quasi-panel data over the 1990–2004 period and employing the double fixed effect model, the empirical results first confirm the existence of wage premiums for workers with postgraduate degrees. However, the analysis on the dynamics of wage premiums finds that it ranged from only 1.40 to 11.67% and decreased sharply in 2004, indicating that the pecuniary reward for postgraduate qualification seems not to be as high as expected. Along with the rapid expansion of higher education, the concern about its negative impact on rate of returns to education is witnessed in this study. The sharp increase in the supply of postgraduate labors appears to have a negative impact on an individual’s wage premium. Similarly, a decline in the postgraduate labor quality along with higher education expansion has contributed to a negative wage effect.

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Notes

  1. If the students who enroll in a masters program in foreign countries are included, the ratio of postgraduates to college/university undergraduates is about 20% in 2006.

  2. See Psacharopoulos (1994), Card (1999), and Psacharopoulos and Patrions (2004) for a more comprehensive survey.

  3. This situation particularly applies when there is skill-biased technological change (hereafter, SBTC), because it is one of the major causes in the widened education premium on the demand side (e.g. Bound and Johnson, 1992; Berman et al. 1994; Allen 2001).

  4. There are some (vocational) colleges remaining until now, because they do not meet the standards to transform into four-year universities. However, their recruiting quota of students was cut down by the Ministry of Education year by year.

  5. One alternative reason which caused the increasingly high passing rate is the trend of the lower fertility rate in Taiwan for the last two decades.

  6. In most developed countries, the higher education expansion has been accompanied with differentiation which had consisted almost exclusively of research universities and developed second-tier colleges. However, Taiwan’s higher education expansion is criticized to be homogenized by eliminating the vocational education system.

  7. The parameter can be used to derivate the marginal internal rate of return to additional schooling only depends on a set of assumptions. Concerning these assumptions, please see Bjorklund and Kjellstrom’s (2002) discussions.

  8. According to the definition proposed by the Small and Medium Enterprise Administration, from the Ministry of Economic Affairs of Taiwan, a firm with more than 200 employees is classified as a large enterprise.

  9. The nine occupations include: (1) legislators, government administrators, business executives and managers, (2) professionals, (3) technicians and associate professionals, (4) clerks, (5) service workers and shop and market sales workers, (6) agricultural, animal husbandry, forestry and fishing workers, (7) craft and related trades workers, (8) plant and machine operators and assemblers, and (9) elementary occupations.

  10. The nine industries include: (1) agriculture, forestry, fishing and animal husbandry, (2) mining and quarrying, (3) manufacturing, (4) electricity and gas supply, (5) water supply and remediation services, (6) construction, (7) wholesale and retail trade, (8) transportation and storage, and (9) accommodation and food services.

  11. The estimate on experience variable is probably misleading for women who leave the labor force.

  12. Some studies have found that there were skill-biased technological changes and led to a higher demand for higher educated and skilled labor in Taiwan in late 1990 to early 2000s, e.g. Tang and Tseng (2004) and Yang and Lin (2008).

  13. The worst case situation is to spend 3 years to finish the master’s degree, including the thesis.

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Authors and Affiliations

  1. Department of Economics, National Central University, Taoyuan, Taiwan

    Chih-Hai Yang & Chien-Ru Lin

  2. Department of Industrial Economics, Tamkang University, 151 Ying-Chuan Road, Tamsui, Taipei County, 25137, Taiwan

    Chun-Hung A. Lin

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  1. Chih-Hai Yang
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  2. Chun-Hung A. Lin
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  3. Chien-Ru Lin
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Correspondence to Chun-Hung A. Lin.

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Yang, CH., Lin, CH.A. & Lin, CR. Dynamics of rate of returns for postgraduate education in Taiwan: the impact of higher education expansion. Asia Pacific Educ. Rev. 12, 359–371 (2011). https://doi.org/10.1007/s12564-010-9132-y

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