The returns to education in Italy in recent years

Investment in human capital is fundamental for economic growth and a major part of this investment is through education. The economic importance of education is a key driver for government actions in this area. However, public policy support for investment in education is not enough: the investment also needs to be considered worthwhile by the students. This paper analyses the economic return from education in Italy by using data collected by the Survey on Household Income and Wealth (SHIW), provided by the Bank of Italy for the years 2012, 2014, 2016. Returns from education are estimated through a typical Mincerian income equation, which has been used widely in most empirical research on human capital theory. Building on existing work, a cross-sectional analysis is conducted for the most recent data available which allows observation of the changes in the economic returns in this area. The analysis estimates the economic return from an additional year of education, as well as estimates by gender and different geographical areas. One major result is that the economic return from education is significantly smaller than reported in previous research and the return shows a decreasing trend over the time span analyzed: our estimates are that it has reduced from 2% in 2012, to about 1.8% in 2016. This result might be explained by the large adoption of temporary contracts with low wages among young graduates entering the labor market.