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Self-employment earnings and returns to education in rural Peru

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Author Info
Sonia Laszlo

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Abstract

This article estimates the returns to education for households who derive part of their income from household based non-farm self-employment ventures in rural Peru. While education is an individual level variable, earnings are observed at the household level. This asymmetry complicates both the estimation and the interpretation of the returns to education. This article is the first jointly to incorporate three channels through which education affects household earnings. Education affects earnings through the marginal productivity of labour (worker effect), labour allocation across activities (between-activity allocative effect) and its production externality effect (spillover effect). The results suggest that the between-activity allocative effects of education dominate the returns. This article also makes novel use of economic geography to proxy for the role that access to markets plays in determining these returns. In particular, altitude is a strong predictor of activity choice and the returns to education in this mountainous country.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal The Journal of Development Studies.

Volume (Year): 41 (2005)
Issue (Month): 7 (October)
Pages: 1247-1287
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Handle: RePEc:taf:jdevst:v:41:y:2005:i:7:p:1247-1287

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References listed on IDEAS
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.:

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  2. Mark Rosenzweig & Andrew D. Foster, . "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Home Pages _068, University of Pennsylvania. [Downloadable!]
    Other versions:
  3. Alderman, H. & Chiappori, P.A. & Haddad, L., 1994. "Unitary versus Collective Models of the Household: Time to Shift the Burden of Proof?," DELTA Working Papers 94-17, DELTA (Ecole normale supérieure).
    Other versions:
  4. Alderman, Harold, et al, 1995. "Unitary versus Collective Models of the Household: Is It Time to Shift the Burden of Proof?," World Bank Research Observer, Oxford University Press, vol. 10(1), pages 1-19, February.
  5. John Chao & Norman Swanson, 2003. "Alternative Approximations of the Bias and MSE of the IV Estimator Under Weak Identification With an Application to Bias Correction," Departmental Working Papers 200315, Rutgers University, Department of Economics. [Downloadable!]
    Other versions:
  6. Basu, Kaushik & Narayan, Ambar & Ravallion, Martin, 2001. "Is literacy shared within households? Theory and evidence for Bangladesh," Labour Economics, Elsevier, vol. 8(6), pages 649-665, December. [Downloadable!] (restricted)
  7. Yang, Dennis T., 1995. "Education in Production: Measuring Labor Quality and Management," Working Papers 95-56, Duke University, Department of Economics.
  8. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August. [Downloadable!] (restricted)
  9. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June. [Downloadable!] (restricted)
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  1. Jonasson, Erik & Helfand, Steven, 2008. "Locational Determinants of Rural Non-Agricultural Employment: Evidence from Brazil," Working Papers 2008:3, Lund University, Department of Economics. [Downloadable!]
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