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Education, Work and Wages in the UK

Bingley, Paul, Walker, Ian, Zhu, Yu (2005) Education, Work and Wages in the UK. German Economic Review, 6 (3). pp. 395-414. ISSN 1465-6485. (doi:10.1111/j.1468-0475.2005.00139.x) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:3772)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided.
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This paper is concerned with the relationship between education, wages and working behaviour. The work is partly motivated by the sharp distinction in the literature between the returns to education and the effect of wages on labour supply. Education is the investment that cumulates in the form of human capital while labour supply is the utilization rate of that stock. Yet, variation in education is usually the basis for identifying labour supply models – education is assumed to determine wages but not affect labour supply. Moreover, it is commonly assumed that the private rate of return to education can be found from the schooling coefficient in a log-wage equation. Yet, the costs of education are largely independent of its subsequent utilization but the benefits will be higher the greater the utilization rate. Thus the returns will depend on how intensively that capital is utilized and we would expect that those who intend to work least to also invest least in human capital. Indeed, the net (of tax liabilities and welfare entitlements) return to education will be a complex function of labour supply and budget constraint


Here we attempt to model the relationship between wages, work, education and the tax/welfare system allowing for the endogeneity of education as well for the correlations between the unobservable components of wages and working behaviour. We use the estimates to simulate the effect of a new UK policy designed to increase education for children from low-income households.

Item Type: Article
DOI/Identification number: 10.1111/j.1468-0475.2005.00139.x
Subjects: H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Funders: Department for Education (
European Commission (
Depositing User: Yu Zhu
Date Deposited: 06 Sep 2008 15:14 UTC
Last Modified: 12 Jul 2022 10:38 UTC
Resource URI: (The current URI for this page, for reference purposes)

University of Kent Author Information

Zhu, Yu.

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