Appraising the lifetime private economic returns of postgraduate degrees: Evidence from Pakistan

In Pakistan, public sector investment has significantly increased in higher education over the last two decades. This study, therefore, aims to estimate the private economic returns of Ph.D. faculty members over their non-PhD counterparts in Pakistani universities. We use questionnaire-based survey data of 784 respondents comprising Ph.D. and non-Ph.D. faculty members. In the first step, earning function is estimated for the entire group. In the next step, the lifetime private economic returns are calculated with the help of the simulation process, which yields the net present values (NPV) of the lifetime earnings for the two subgroups. Our findings show that the lifetime private economic returns of a Ph.D. degree are higher than a non-Ph.D. degree. In the case of a domestic Ph.D. degree, the average lifetime economic returns of the Ph.D. are 46.5% higher than those of non-Ph.D. faculty members. In contrast, foreign-country Ph.D. degree holders earn 29.8% extra than non-Ph.D. faculty members. Therefore, the net lifetime returns of foreign Ph.D. holders are 16.7% points less than the domestic degree holders because the cost of doing a Ph.D. degree from a foreign university is higher. Our sensitivity analysis reveals that changing the retirement age from 60 to 55 and 65 does not affect these results. However, the difference between the net returns decreases if the retirement age is 55 and increases in the case of 65. Similarly, increasing the completion time of a Ph.D. also affects the net lifetime private economic return negatively.

Adnan Bashir, Zahid Siddique