Returns to Education in UK Essay Example | Topics and Well Written Essays - 3750 words - 1

Returns to Education in UK - Essay Example This study has analysed returns to education in the UK. This was done using the BHPS data from 1991-2008 by using an OLS regression model adapted from previous studies. The dependent variable was logarithm of hourly wage while the predictor variable tested was years of schooling, controlling for other factors. The control variables were age, sex, race and region. Diagnostic tests was conducted to check for heteroskedascity and also the presence of serial correlations and both were found not to affect the model hence the regression was run. The analysis shows that the number of years in schooling had a positive and significant effect on the logarithm of hourly wage (about 8% per year of schooling) which suggests that there were positive returns to education in the sample. This is consistent with a number of studies that have analysed the returns to education. From the R-squared results, the model accounted for 24% of the variance in hourly wages. Thus, the regression did not explain most of the variance in hourly wages but points to the fact that the number of years of schooling is a good predictor of returns in education. However, we cannot rule out endogeneity (race results) and given low overall significance of regression.