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Article
Publication date: 27 October 2021

Claudio E. Montenegro and Harry Anthony Patrinos

Young people experience lower employment, income and participation rates, as well as higher unemployment, compared to adults. Theory predicts that people respond to labor…

Abstract

Purpose

Young people experience lower employment, income and participation rates, as well as higher unemployment, compared to adults. Theory predicts that people respond to labor market information. For more than 50 years, researchers have reported on the patterns of estimated returns to schooling across economies, but the estimates are usually based on compilations of studies that may not be strictly comparable. The authors create a dataset of comparable estimates of the returns to education.

Design/methodology/approach

The data set on private returns to education includes estimates for 142 economies from 1970 to 2014 using 853 harmonized household surveys. This effort holds the constant definition of the dependent variable, the set of controls, sample definition and the estimation method for all surveys.

Findings

The authors estimate an average private rate of return to schooling of 10%. This provides a reasonable estimate of the returns to education and should be useful for a variety of empirical work, including critical information for youth.

Originality/value

This is the first attempt to bring together surveys from so many countries to create a global data set on the returns to education.

Details

International Journal of Manpower, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0143-7720

Keywords

Article
Publication date: 17 March 2021

Richard Kofi Asravor

The increasing rate at which individuals, especially, females in Ghana are seeking higher education calls for an estimation of the returns to schooling and education in Ghana.

Abstract

Purpose

The increasing rate at which individuals, especially, females in Ghana are seeking higher education calls for an estimation of the returns to schooling and education in Ghana.

Design/methodology/approach

The study employs the Mincer equation to a representative cross-sectional micro-data from Ghana using OLS and instrumental variable (IV) methodologies. The paper uses spouse's education as instruments in the IV estimation.

Findings

Return to schooling was found to be higher for females than males, likewise, membership of an old student associations and location of the household. Returns to education increases as the level of education rises whilst the rate of returns initially increases but fall as labour market experience rises. The study also found that the rates of return to education were higher for Christian, followed by Muslim and believers of other lesser-known religion in Ghana.

Research limitations/implications

Return to schooling was found to be higher for females than males. Likewise, individuals who are members of an old student association and are in urban areas were found to have a higher return to schooling than individuals who are not members of an old student association and are in rural areas. Returns to education increases as the level of education rises whilst the rate of returns initially increases but fall as labour market experience rises. The study also found that the rates of return to education were higher for Christian, followed by Muslim and believers of other lesser-known religion in Ghana.

Practical implications

Wage determination process is different for males and females, across religion and residency. The higher returns to schooling for females imply education is a good investment for women and girls and should be a development priority.

Social implications

The higher returns to schooling for females imply an investment in girl's education should be a development priority.

Originality/value

The paper extends the existing literature by focussing on the role of religion, old student's association (alma mater) and gender on the differential earning returns to schooling.

Details

International Journal of Social Economics, vol. 48 no. 6
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 2 May 2017

Qihui Chen, Jingqin Xu, Jiaqi Zhao and Bo Zhang

The purpose of this paper is to estimate the returns to rural schooling in China, addressing both endogeneity in rural individuals’ schooling and self-selection into off-farm work.

Abstract

Purpose

The purpose of this paper is to estimate the returns to rural schooling in China, addressing both endogeneity in rural individuals’ schooling and self-selection into off-farm work.

Design/methodology/approach

This paper exploits geographical proximity to rural secondary schools to create instrumental variables (IV) for individuals’ years of schooling. It addresses both endogenous schooling and self-selection using the two-step procedure developed in Wooldridge (2002, p. 586).

Findings

The preferred IV estimate of schooling returns, 7.6 percent, is considerably higher than most previous estimates found in rural China.

Originality/value

This paper is among the few papers that examine returns to rural schooling in China while simultaneously addressing both endogeneity in individuals’ schooling and self-selection into off-farm work. Its findings suggest that rural education in China is potentially able to generate a respectable level of economic returns if policies are designed to provide greater school accessibility to rural individuals.

Details

China Agricultural Economic Review, vol. 9 no. 2
Type: Research Article
ISSN: 1756-137X

Keywords

Article
Publication date: 26 May 2020

Leszek Wincenciak

The purpose of this study is to provide the estimates of returns to schooling using consistent methodology and comparable set of data for a long time horizon for a country…

Abstract

Purpose

The purpose of this study is to provide the estimates of returns to schooling using consistent methodology and comparable set of data for a long time horizon for a country undergoing economic transition. Second, the paper aims to verify if returns to schooling in Poland were pro-cyclical or counter-cyclical.

Design/methodology/approach

The paper is based on the human capital theory in estimating the wage returns to years of schooling controlling additionally for unemployment rates at a regional level. Data come from a collection of Polish individual LFS waves for the period 1995–2017.

Findings

Returns to schooling in Poland were increasing until 2006 and declining afterwards unveiling the supply side effects domination. The estimates suggested counter-cyclicality of returns in Poland.

Research limitations/implications

Using LFS data made it impossible to control for ability bias therefore it is possible that the estimates are somewhat biased (the literature however suggests that the extent of the bias is likely to be small). It might still be argued that using consistent methodology for the whole period of analysis still offers valuable insight into returns evolution.

Originality/value

This paper finds a reversal of returns trend after 2006 suggesting the period after accession to EU exhibited a supply side effect domination. The findings on counter-cyclicality of returns to education in Poland have not yet been documented in the literature.

Details

International Journal of Manpower, vol. 41 no. 8
Type: Research Article
ISSN: 0143-7720

Keywords

Article
Publication date: 6 June 2016

Yangqin Weng, Mingzhi Li and Check-Teck Foo

This paper aims to analyze the rates of returns on education in China and in the process raises issues relevant to the management of China’s system of education. In the…

Abstract

Purpose

This paper aims to analyze the rates of returns on education in China and in the process raises issues relevant to the management of China’s system of education. In the ongoing great transformation period of China, the rising rates of returns on education may have been indicators reflecting China’s social progressiveness. However, very little research efforts have been devoted to the study of the impacts of such factors as geographical regions and genders, etc. The authors hope to fill these gaps in the literature.

Design/methodology/approach

The China Health and Nutrition Survey (CHNS) database is used for this study (University of North Carolina). The longitudinal nature of the data sets covering 1989, 1991, 1993, 1997, 2000, 2004, 2006, 2009 and 2011 provides a good basis for comparative analyses. The theory is grounded upon the Mincer equations through which econometric estimates are then made.

Findings

Disparities in returns on education are found between genders and across geographical regions. The regression results show that the women’s returns on education are consistently higher than those of men. However, the scales of such gender differences differ between the rural and urban areas: smaller for rural area and larger, more significantly so for urban. Additionally, we have found that the rates of returns on education in China have risen significantly over these years, and these increases have been largely due to the effects of institutional reforms. The urban-rural gap in their degrees of market orientation has contributed to the differences in their rates of returns on education. The analyses also suggest that foreign direct investment inflows, international trade and the increasing competitiveness from private enterprises render human capital more valuable to urban businesses. In case of the rural areas, a lack of incentive system tends to have contributed to the lower rates of returns on education.

Originality/value

The authors have presented evidence on the trends in the rates of returns on education during China’s critical transition period. Analyses of the possible reasons behind the differential rates of returns are provided. These findings are helpful for the government to shape their policies towards education. For instance, the government should give more emphasis to vocational schooling due to their significantly higher rates of returns.

Details

Chinese Management Studies, vol. 10 no. 2
Type: Research Article
ISSN: 1750-614X

Keywords

Book part
Publication date: 19 May 2010

Sarah Donovan and Kenneth A. Swinnerton

We study how the returns to education in the adult labor market affect children's school enrollment. We show that when families are liquidity constrained, the expected…

Abstract

We study how the returns to education in the adult labor market affect children's school enrollment. We show that when families are liquidity constrained, the expected relationship between higher returns and children's schooling is ambiguous. When liquidity constraints matter, the relationship can only be assessed empirically. For African-South African liquidity-constrained households, we find a positive relationship that is quite robust.

Details

Child Labor and the Transition between School and Work
Type: Book
ISBN: 978-0-85724-001-9

Book part
Publication date: 10 November 2014

Matthias Cinyabuguma, William Lord and Christelle Viauroux

This paper addresses revolutionary changes in the education, fertility and market work of U.S. families formed in the 1870s–1920s: Fertility fell from 5.3 to 2.6; the…

Abstract

This paper addresses revolutionary changes in the education, fertility and market work of U.S. families formed in the 1870s–1920s: Fertility fell from 5.3 to 2.6; the graduation rate of their children increased from 7% to 50%; and the fraction of adulthood wives devoted to market-oriented work increased from 7% to 23% (by one measure).

These trends are addressed within a unified framework to examine the ability of several proposed mechanisms to quantitatively replicate these changes. Based on careful calibration, the choices of successive generations of representative husband-and-wife households over the quantity and quality of their children, household production, and the extent of mother’s involvement in market-oriented production are simulated.

Rising wages, declining mortality, a declining gender wage gap, and increased efficiency and public provision of schooling cannot, individually or in combination, reduce fertility or increase stocks of human capital to levels seen in the data. The best fit of the model to the data also involves: (1) a decreased tendency among parents to view potential earnings of children as the property of parents and (2) rising consumption shares per dependent child.

Greater attention should be given the determinants of parental control of the work and earnings of children for this period.

One contribution is the gathering of information and strategies necessary to establish an initial baseline, and the time paths for parameters and targets for this period beset with data limitations. A second contribution is identifying the contributions of various mechanisms toward reaching those calibration targets.

Details

Factors Affecting Worker Well-being: The Impact of Change in the Labor Market
Type: Book
ISBN: 978-1-78441-150-3

Keywords

Article
Publication date: 1 July 2005

Paul E. Gabriel and Susanne Schmitz

Seeks to answer the question: “do certain occupations offer lower financial benefits to acquiring years of formal schooling than others?”.

846

Abstract

Purpose

Seeks to answer the question: “do certain occupations offer lower financial benefits to acquiring years of formal schooling than others?”.

Design/methodology/approach

This study uses data from the 2003 Current Population Survey to estimate rates of return to education across occupational categories in the US labor market. The wage model employed is based on the human capital model of income determination.

Findings

The analysis suggests that additional schooling has a positive impact on the weekly earnings of men and women in both white‐ and blue‐collar occupations – with the highest returns accruing to sales, managerial, and professional workers. Although returns are generally higher for white‐collar workers, no link is found between the returns to schooling and the propensity of occupations to be comprised of “primary” or “secondary” sector jobs.

Originality/value

Supports the notion that additional schooling increases the earnings of men and women in both blue‐ and white‐collar occupations.

Details

International Journal of Manpower, vol. 26 no. 5
Type: Research Article
ISSN: 0143-7720

Keywords

Book part
Publication date: 14 July 2004

Christian Belzil and Jörgen Hansen

We estimate a dynamic programming model of schooling decisions in which the degree of risk aversion can be inferred from schooling decisions. In our model, individuals are…

Abstract

We estimate a dynamic programming model of schooling decisions in which the degree of risk aversion can be inferred from schooling decisions. In our model, individuals are heterogeneous with respect to school and market abilities but homogeneous with respect to the degree of risk aversion. We allow endogenous schooling attainments to affect the level of risk experienced in labor market earnings through wage dispersion and employment rate dispersion. We find a low degree of relative risk aversion (0.93) and the estimates indicate that both wage and employment rate dispersions decrease significantly with schooling attainments. We find that a counterfactual increase in risk aversion will increase schooling attainments. Finally, the low degree of risk aversion implies that an increase in earnings dispersion would have little effect on schooling attainments.

Details

Accounting for Worker Well-Being
Type: Book
ISBN: 978-1-84950-273-3

Book part
Publication date: 11 May 2017

Lorenzo Cappellari, Paolo Castelnovo, Daniele Checchi and Marco Leonardi

We use OECD-PIAAC data to estimate the earnings effects of both years of education and of numerical skills. Our identification strategy exploits differential exposure to

Abstract

We use OECD-PIAAC data to estimate the earnings effects of both years of education and of numerical skills. Our identification strategy exploits differential exposure to educational reforms across birth cohorts and countries. We find that education has the strongest earnings effect. A one standard deviation increase in years of education raises earnings by almost 22 percentage points (corresponding to a return to education above 7 percentage points), which compares with a lower percentage points return to an equivalent increase in numerical skills. Our results suggest that the same set of unobservables drives the accumulation of both formal years of education and numeracy skills. OLS estimates underestimate returns to human capital, consistently with the idea that educational reforms favor the human capital acquisition of abler children from disadvantaged parental backgrounds. When we consider numerical skills alone education reforms cannot identify any significant effect of skills on wages, however, when we jointly consider schooling and skills as endogenous factors in a recursive structure we find a significant role for skills in determining wages.

Details

Skill Mismatch in Labor Markets
Type: Book
ISBN: 978-1-78714-377-7

Keywords

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