Investing in human capital increases lifetime earnings, but these investments may involve substantial risk. In this paper we use panel data spanning 22 years to predict the mean, the variance and the skew of the present value of lifetime earnings and to calculate certainty equivalent lifetime incomes in different levels of education. We find that university education is associated with about a half a million increase in discounted lifetime disposable income compared to vocational high school. Accounting for risk does little to change this picture. By contrast, vocational high school is associated with only moderately higher lifetime incomes compared to compulsory education, and the entire difference is due to differential nonemployment.
JEL Classification: J31
In this article, we draw a parallel between equality of opportunity in educational transitions and equality of opportunity in academic careers. In both cases, many methodological problems can be ameliorated by the use of longitudinal rather than cross-sectional data. We illustrate this point by using Finnish full-population register data to follow the educational and academic careers of the 1964–1966 birth cohorts from birth to the present day. We show how the Finnish professoriate is highly selected both in terms of parental background and in terms of gender. Individuals of different backgrounds differ greatly in the likelihood of completing different educational and academic transitions, but much less in the age at which they make these transitions. By contrast, women’s academic careers differ from those of men both in terms of timing and in terms of rates, with women’s PhDs and full professorships seemingly delayed compared to those of men. We additionally show with the help of a 2015 cross-section of Finnish professors how such differences are easily overlooked in cross-sectional data.
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