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fiscal internal rate of return

The rate of return represents a measure of the returns obtained, over time, relative to the costs of the initial investment in education. More specifically, the fiscal internal rate of return is equal to the discount rate that equalises the costs of education to the benefits of education for the public sector. For the public sector, the costs of education include public direct and indirect expenditures on education, as well as lost income tax revenues on students foregone earnings. The benefits, for the public sector, include increased revenues from income taxes on higher wages. In practice, the achievement of higher levels of education will give rise to a complex set of fiscal effects on the benefit side, beyond the effects of wage-based revenue growth. For instance, better educated individuals generally experience superior health status, lowering public outlays on the provision of health care. See also Private internal rate of return and Social internal rate of return.

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