Governments sometimes promote reforms that increase access to education for a large share of the population. These reforms may lower the returns to education by altering returns to skills, education quality, and peer effects. This column examines a 1961 Italian reform that increased enrolment in university STEM majors among students who had previously been denied access. The reform ultimately failed to raise their incomes.
Several findings suggest that the enrolment expansion following the policy implementation lowered the returns to a STEM degree. To analyze changes in the value of a university education, I focus on the students who were not directly affected by the reform – the graduates from university-prep high schools. Among these students, returns to STEM education declined after 1961 to the point of erasing the pre-reform income premium associated with a STEM degree.
This decline can be partially explained by a lower amount of skills acquired in STEM majors after 1961. I find that human capital (measured by absolute grades) decreased more in STEM courses in which resources became more crowded and in which the entry of technical students had greater disruptive potential. Overall, lower resources per student can explain 31% of the income decline, while the change in class composition can explain another 37.3%. The remaining share can be attributed to higher supply of workers with a university STEM education or possibly other minor channels of general equilibrium effects.
By decreasing the value of STEM education, the reform might have deprived STEM majors of talented students. After 1961, many more students with a university-prep diploma decided to enroll in university majors that were still not accessible to technical students (see Figure 2). This effect was concentrated among the students with higher high school grades.
Figure 2 Cohort shares of students from university-prep high schools enrolling in university STEM majors and programs with restricted access after 1961
Chosen excerpts by Job Market Monitor. Read the whole story at Access to higher education and the value of a university degree | VOX, CEPR’s Policy Portal.
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