Rate of Return to University Education:

Focusing on National versus Private University and University Ranking

Abstract

This paper estimates the rate of return to university education, focusing on national versus private universities, and university ranking.

The rate of return to national university education is 8.6% and the rate of return to private universities is 6.5%. The rate of return to high-ranking private universities (with a Hensachi score of 55 or more) is 8.7% and to low-ranking private universities (with a Hensachi score of 45 or lower) is 5.0%. Further, even if controlling innate abilities, the rate of return to low-ranking private university education is estimated as 3.7.

In summary, the rate of return to national universities is much higher than for private universities and almost equal to the rate for high-ranking private universities. However, even after controlling innate abilities, the rate of return to low-ranking private universities is much higher than the market rate of return in absolute terms.