Measuring the value of externalities from higher education

Abstract

This paper takes an innovative approach. We have used the idea of converting international evidence of the size of higher education externalities as a proportion of GDP into Australian-specific dollar equivalents and added these estimates to estimates of lifetime fiscal returns to graduates. This allows us to estimate the expected spillovers over a graduate’s lifetime, an opportunity that has so far not been taken elsewhere. We conclude that an additional year of higher education in an Australian context, valued at the time of a student’s enrolment, lies between $10,635 and $15,952 in 2014 terms. We also acknowledge that it is difficult and inappropriate to apply estimates of average externalities to issues related to public sector pricing. However, having some idea of the boundaries of the potential sizes of higher education spillovers is a valuable and interesting exercise.