Abstract:

What are the economic returns to higher education? I use the openings of new universities in Germany coupled with administrative data on earnings to provide new evidence on this question. I document that the opening of a new university in an individual's district increases the likelihood of obtaining a university degree and conduct several tests to verify the robustness of this finding. I then use the variation in university access to instrument the effect of higher education on earnings later in life–measured using social security data–and obtain large and positive return estimates. The results of my study document the economic returns to an expansion of the higher education system and suggest that university education has high labor market returns even in an environment featuring a high-quality apprenticeship training system.