Rate of return analysis and economies of scale in higher education

This paper presents the results of a study of the rate of return on undergraduate education at the University of Bradford, United Kingdom, and compares them with returns calculated independently for the U.K. university system as a whole. Rates of return are measured for separate undergraduate courses and considerable variation is shown, courses in science and technology generally having lower return because of their higher costs. Private returns to the individual graduate are shown to be substantially greater than those to society as a whole. The government's return, in the form of increased tax receipts is shown to be positive. Further results demonstrate increasing marginal rates of return to society as a result of the economies of scale associated with the expansion of enrolment planned for the decade 1971–1981. The problems involved in projecting rates of return into the future are considered.The paper is directed to teachers and students of the economics of education.