In this paper the economic return to formal education in Chile is estimated. The construction of an earnings-profile for each educational level is a basic ingredient in the computation of the rate of return. The paper uses a much larger sample than previous studies both in terms of the number of observations and its geographic representation. Moreover, the method allows the return of the marginal schooling year to be different among each educational level, resulting in more accurate estimates and better policy recommendations. The earnings-profiles also provide basic information to the computation of human capital stock in the country. One additional schooling year is associated with an average increase in labor earnings of 12%, although the effect is very different in each level (bigger in higher levels and lower in preparatory). A positive relationship between educational attainment and the probability of being employed is found. Considering both the effects in earnings and employment, from a private point of view, we obtain a rate of return of 16.2% to preparatory schooling, 12.2% to general high school, 13.6% to vocational high school, 17.7% to college and 14.7% to technical education. The existence of subsidies and income taxes decreases both the rates of return figures and the difference among them. The social rates of returns result in 10% (preparatory), 11.2% (general high school), 11.8% (vocational high school), 15.4% (college) and 14.9% (technical). Exogenous increases in real wages change the absolute rates of return, but not the relative figures. A real growth of 2% a year in wages results in rates of return between 15% and 25% higher to each educational level. Failure to complete each level in the official number of years lowers the rates of return significantly. The option to proceed to higher levels of education that lower levels provide, implies a big increase in the rate of return to preparatory and high school.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.
Find related papers by JEL classification: J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
William Maloney & Andrés Rodríguez-Clare, 2005.
"Innovation Shortfalls,"
RES Working Papers
4429, Inter-American Development Bank, Research Department.
[Downloadable!]
Did you know? You can create a compilation of all publications of a group of people, say alumni of a program, your students or memers of an association.