Rates of return on university education with economies of scale

✍ Scribed by Anthony Bottomley; John Dunworth

• Publisher: Springer
• Year: 1974
• Tongue: English
• Weight: 609 KB
• Volume: 3
• Category: Article
• ISSN: 0018-1560
• DOI: 10.1007/bf00153994

✦ Synopsis

This paper presents measurements of the rates of return obtained from investment in university education and the changes in these rates which might be expected with expansion. The social internal rate of return varies between 5 and 11% on different undergraduate courses at the University of Bradford. The private return to the successful student averages 12.2% for those who pay their own expenses, but rises to 24.9% for students receiving the full public grant. By contrast the government is shown to receive an average of 5.1% return on its expenditure in terms of the income tax yield of the increased earnings of graduates.

The authors believe that in planning future investment in higher education, marginal rates of return, rather than existing average rates, are the relevant yardstick. They show that, on the evidence of courses at the University of Bradford, marginal cost is likely to be substantially lower than present average cost, as expansion takes place. Lower costs, due to economies in staff and to the more intensive use of teaching accommodation, are shown to result in a marginal social rate of return averaging 10.8%, raising the average rate of return from its present 8.8% to 10.0%.

In this paper 1 we will try to show: (1) how much university education costs, (2) what the rates of return are and who gets them, (3) how costs might be reduced with expanded enrolment, and (4) how rates of return on investment in university education would be thus increased. The discussion will throw light on the question of whether or not the universities should be allowed to expand.

How Much Does a University Education Cost? Two enquiries have been conducted into the cost of "producing"