Estimating the Financial Return to Education Between Fields of Study

Abstract

The Mincer regression equation was utilized to compute the expected financial return to education from additional years of education across the 2016 Canadian population. Data was taken from the 2016 Canadian Census of Population to create the populations of interest. Three sub populations were then derived from the collected data to represent Canadians with different major areas of study namely, business, humanities, and engineering. Mincerian regressions were run using these subsections to determine how the financial return to education differs between distinct majors. Additional multiple regressions included an interaction term between sex and years of schooling in an attempt to determine whether an individual’s sex affects their expected return to education given a specific area of study. The regression results indicated that business majors boast the largest average expected return to education while engineering majors boast the lowest. Subsequently, in relation to business majors, sex was not found to have an impact on expected financial returns. Future research may build off the findings of this paper by expanding the scope to include all areas of study in addition to deciphering whether the expected return to education for a given major is consistent throughout all major Canadian universities.