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Returns to Education: New Evidence for India, 1983-1999

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  • Puja Vasudeva Dutta

Abstract

This paper estimates the returns to education for adult male workers in regular and casual wage employment using Indian national survey data at three points in time spanning almost two decades. Both standard and augmented Mincerian wage equations are estimated using a set of human capital measures and other controls after addressing the issue of potential selection bias. This paper finds that the returns to education are significantly different for the two types of workers—while casual workers face at best flat returns to education, the returns to education for regular workers are positive and U-shaped with respect to education levels. There is also some evidence of a widening wage gap between regular workers with graduate and primary education that could possibly be a consequence of trade liberalization and other reforms pursued during the 1990s.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Education Economics.

Volume (Year): 14 (2006)
Issue (Month): 4 ()
Pages: 431-451

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Handle: RePEc:taf:edecon:v:14:y:2006:i:4:p:431-451

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Related research

Keywords: Rate of return; human capital; India;

References

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  1. Behrman, Jere R & Birdsall, Nancy, 1983. "The Quality of Schooling: Quantity Alone is Misleading," American Economic Review, American Economic Association, vol. 73(5), pages 928-46, December.
  2. Whitney Newey, 1999. "Two Step Series Estimation of Sample Selection Models," Working papers 99-04, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Geeta Gandhi Kingdon, 1997. "Does the Labour Market Explain Lower Female Schooling in India?," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 01, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  4. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc.
  5. Christopher R. Bollinger & Amitabh Chandra, 2003. "Iatrogenic Specification Error: A Cautionary Tale of Cleaning Data," NBER Technical Working Papers 0289, National Bureau of Economic Research, Inc.
  6. Geeta Gandhi Kingdon & Jeemol Unni, 2001. "Education and Women's Labour Market Outcomes in India," Education Economics, Taylor & Francis Journals, vol. 9(2), pages 173-195.
  7. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-29, April.
  8. Kingdon, Geeta, 1996. "The Quality and Efficiency of Private and Public Education: A Case-Study of Urban India," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 57-82, February.
  9. Puja Vasudeva Dutta, 2005. "Accounting for Wage Inequality in India," PRUS Working Papers 29, Poverty Research Unit at Sussex, University of Sussex.
  10. Newell, Andrew & Reilly, Barry, 1997. "Rates of Return to Educational Qualifications in the Transitional Economies," Discussion Papers in Economics 03/97, Department of Economics, University of Sussex.
  11. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  12. Psacharopoulos, George & Patrinos, Harry Anthony, 2002. "Returns to investment in education : a further update," Policy Research Working Paper Series 2881, The World Bank.
  13. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
  14. Banerjee, Biswajit & Knight, J. B., 1985. "Caste discrimination in the Indian urban labour market," Journal of Development Economics, Elsevier, vol. 17(3), pages 277-307, April.
  15. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," World Bank Economic Review, World Bank Group, vol. 11(1), pages 33-57, January.
  16. Sahn, David E. & Alderman, Harold, 1988. "The effects of human capital on wages, and the determinants of labor supply in a developing country," Journal of Development Economics, Elsevier, vol. 29(2), pages 157-183, September.
  17. Mark Rosenzweig & Andrew D. Foster, . "Technical Change and Human Capital Returns and Investments: Evidence from the Green Revolution," Home Pages _065, University of Pennsylvania.
  18. Francis Vella, 1998. "Estimating Models with Sample Selection Bias: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 127-169.
  19. Jorge Saba Arbache & Andy Dickerson & Francis Green, 2004. "Trade Liberalisation and Wages in Developing Countries," Economic Journal, Royal Economic Society, vol. 114(493), pages F73-F96, 02.
  20. Bennell, Paul, 1996. "Rates of return to education: Does the conventional pattern prevail in sub-Saharan Africa?," World Development, Elsevier, vol. 24(1), pages 183-199, January.
  21. Appleton, Simon & Hoddinott, John & Knight, John, 1996. "Primary Education as an Input into Post-primary Education: A Neglected Benefit," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 211-19, February.
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Citations

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Cited by:
  1. Mehtabul Azam, 2008. "Changes in Wage Structure in Urban India, 1983-2004: A Quantile Regression Decomposition," Departmental Working Papers 0807, Southern Methodist University, Department of Economics.
  2. Asadullah, Niaz & Kambhampati, Uma & López Bóo, Florencia, 2012. "Social Divisions in School Participation and Attainment in India: 1983-2004," IZA Discussion Papers 6329, Institute for the Study of Labor (IZA).
  3. Escobal, Javier & Flores, Eva, 2009. "Maternal Migration and Child Well-Being in Peru," MPRA Paper 56463, University Library of Munich, Germany.
  4. Takahiro Ito, 2009. "Education and Its Distributional Impacts on Living Standards," Global COE Hi-Stat Discussion Paper Series gd09-080, Institute of Economic Research, Hitotsubashi University.
  5. Vegard Iversen & Adriaan Kalwij & Arjan Verschoor & Amaresh Dubey, 2010. "Caste dominance and economic performance in rural India," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 10-01, Indian Statistical Institute, New Delhi, India.
  6. Tushar Agrawal, 2011. "Returns to education in India: Some recent evidence," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2011-017, Indira Gandhi Institute of Development Research, Mumbai, India.
  7. Geeta Kingdon & Nicolas Theopold, 2006. "Do returns to education matter to schooling participation?," Economics Series Working Papers GPRG-WPS-052, University of Oxford, Department of Economics.
  8. Kamal Vatta & Takahiro Sato, 2012. "Indian Labour Markets and Returns to Education, 1983 to 2009-10," Discussion Paper Series DP2012-33, Research Institute for Economics & Business Administration, Kobe University.

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