Economic effectiveness of investment in higher education: an evaluation at the individual and national levels

IF 3.8 Q2 BUSINESS EuroMed Journal of Business Pub Date : 2024-08-06 DOI:10.1108/emjb-12-2023-0334
Gindrute Kasnauskiene, Rokas Badaras, Rasa Pauliene, Alkis Thrassou
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Abstract

Purpose

This study evaluates the economic effectiveness of higher education in Lithuania by measuring returns to investment in higher education for both individual university graduates and the state, particularly aiming to discover how higher education investments impact economic returns at both micro (individual) and macro (national) levels.

Design/methodology/approach

A dual methodological approach has been applied, utilizing both the Mincer earnings equation and the full discounting method, to draw a clear distinction between the returns enjoyed by individuals and those accrued to the country. Calculations for individual economic returns are done using the most recent available Lithuanian Department of Statistics data on the wage structure, while national return on education was based on the State Tax Inspectorate and Lithuanian Public Finance databases.

Findings

The research confirms that Lithuanian investments in education positively influence both individual earnings and society at large, mainly due to the low cost of education and the high returns. For individuals, net present value varies from €126,000 to €224,000, and the internal rate of return is from 7% to 46%, with the highest return being for males working in companies of 50–249 employees and holding a bachelor’s degree. It is also noteworthy that one additional year spent in education increases earnings on average by 4.1%. The financing of first cycle studies costs the state two times less than second and third cycle studies. For this reason, the net present value (NPV) and internal rate of return (IRR) of first cycle studies are higher than those of second and third cycle studies.

Originality/value

While higher education is generally and globally seen as a way to ensure financial stability and career advancement at the individual level and socioeconomic development at the national one, the question of cost versus benefits at both levels is principal and diachronic. Our research quantifies the NPV and IRR of education investments and highlights the differential economic returns of various education levels, where policymakers can utilize these insights to inform strategic decisions regarding education funding and resource allocation. This study, therefore, provides explicit quantitative answers and presents individuals and policymakers with tangible results and practicable direction in their decision-making. The findings are applicable to the specific country-focus, but also constitute an applicable case study in the international context, particularly for European and other countries of comparable economic structure and developmental stage.

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高等教育投资的经济效益:个人和国家层面的评估
目的 本研究通过衡量高等教育投资对大学毕业生个人和国家的回报,评估立陶宛高等 教育的经济效益,特别是旨在发现高等教育投资如何影响微观(个人)和宏观(国 家)层面的经济回报。对个人经济收益的计算采用了立陶宛统计局关于工资结构的最新数据,而国家教育收益则基于国家税务监察局和立陶宛公共财政数据库。就个人而言,净现值从 12.6 万欧元到 22.4 万欧元不等,内部回报率从 7%到 46%不等,其中在员工人数为 50-249 人的公司工作并拥有学士学位的男性回报率最高。此外,值得注意的是,多接受一年教育,收入平均增加 4.1%。国家为第一阶段教育提供的资金是第二和第三阶段教育的两倍。因此,第一周期学习的净现值(NPV)和内部收益率(IRR)均高于第二和第三周期学习的净现值和内部收益率(IRR)。我们的研究量化了教育投资的净现值(NPV)和内部收益率(IRR),并强调了不同教育水平的不同经济回报,政策制定者可以利用这些见解为有关教育经费和资源分配的战略决策提供依据。因此,本研究提供了明确的量化答案,为个人和决策者的决策提供了切实可行的结果和方向。研究结果不仅适用于特定的重点国家,而且也是国际范围内,特别是欧洲和其他经济结构和发展阶段类似的国家的适用案例研究。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
9.80
自引率
19.20%
发文量
61
期刊介绍: The EuroMed Journal of Business (EMJB) is the premier publication facilitating dialogue among researchers from Europe and the Mediterranean. It plays a vital role in generating and disseminating knowledge about various business environments and trends in this region. By offering an up-to-date overview of emerging business practices in specific countries, EMJB serves as a valuable resource for its readers. As the official journal of the EuroMed Academy of Business, EMJB is committed to reflecting the economic growth seen in the European-Mediterranean region. It aims to be a focused and targeted business journal, highlighting environmental opportunities, threats, and marketplace developments in the area. Through its efforts, EMJB promotes collaboration and open dialogue among diverse research cultures and practices. EMJB serves as a platform for debating and disseminating research findings, new research areas and techniques, conceptual developments, and practical applications across various business segments. It seeks to provide a forum for discussing new ideas in business, including theory, practice, and the issues that arise within the field.
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