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The Opportunity Cost of Education: Where Do the Lost Years Go?

Author

Listed:
  • Hafizur Rahman
  • Jim Seldon
  • Zéna Seldon

Abstract

Economists often introduce their classes to opportunity cost concepts by pointing out the additional incomes students could be earning were they employed full time rather than attending university. A potential additional cost, a reduction in years of future labor force participation, is unlikely to be mentioned. We argue that although this ‘work-life’ effect may safely be ignored in calculating rates of return to education, it must be taken into account if the goal is to correctly identify the cost of individuals’ time out of the labor force, particularly for purposes other than education. The fact that this issue was raised in a court case by a vocational analyst provides “real” life example of how this “work life” effect matters and may serve to intrigue our students and validate the study of our discipline. Our paper demonstrates the appropriate methodology and information necessary to identify work-life costs and suggests introducing the concept at introductory levels.

Suggested Citation

  • Hafizur Rahman & Jim Seldon & Zéna Seldon, 2012. "The Opportunity Cost of Education: Where Do the Lost Years Go?," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 12(1), pages 43-52, Fall.
    • Handle: RePEc:mts:jrnlee:v:12:y:2012:i:1:p:43-52
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    File URL: http://frank.mtsu.edu/~jee/2012/6_MS1108_pp43to52.pdf
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    References listed on IDEAS

    as
    1. Ferraro Paul J & Taylor Laura O, 2005. "Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance from the Dismal Science," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-12, September.
    2. Leigh, Andrew & Ryan, Chris, 2008. "Estimating returns to education using different natural experiment techniques," Economics of Education Review, Elsevier, vol. 27(2), pages 149-160, April.
    3. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    4. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    5. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    opportunity cost; labor market; work-life effects of time out of labor force;
    All these keywords.

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate

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