| Abstract [eng] |
This work considers the question of investment in human capital and its efficiency. It also enumerates various methods and techniques that have been used in the Lithuanian and foreign economical literature to estimate the private and social internal rate of return to education. Two main methods are illustrated to assess the effectiveness of the individuals’ investment in higher education: "Full Discounted Cash Flow" method and "Extended Mincer Earnings Function" method, which has not been widely used in Lithuania. The latter method involves econometric estimation of earnings function where log of earnings is regressed mostly on years of studies and experience in the labor market. Under this specification, the estimated coefficient on the years of study variable represents the rate of return to an additional year of education. Dummy variables to the "Basic Mincer Earnings Equation", which are distinguished by the level of education obtained, are included in this work. To compare different methods and the results, basically the same baseline statistics (wage differentiation according to the experience of labor market, gender and education level in 2006) is used. "Mincer" method is carried out by multiple linear regression and the equation coefficients are calculated using the capabilities of SPSS statistical analysis and data processing software. |
