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Are Returns to Education on the Decline in Venezuela and Does Mission Sucre Have a Role to Play?

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Author Info
Gonzales, Naihobe () (Georgia Tech)
Uwaifo Oyelere, Ruth () (Georgia Tech)

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Abstract

There is anecdotal evidence that the standard of living for the educated has fallen in Venezuela over the last few years. This evidence comes as a surprise because after experiencing an economic downturn in 2002 and 2003, Venezuela's economy has boomed (gross domestic product growth has hovered between 8 and 18%) in large part due to the increase in the price of petroleum. In this paper, we provide evidence that returns to education have decreased significantly in Venezuela from 2002 to 2008. More importantly, we focus on what has led to the decrease in returns. We explore a fall in quality and a supply-demand argument for this decline. Mission Sucre was enacted in September 2003 by President Hugo Chavez to provide free mass tertiary education, in particular targeting the poor and marginalized. The implementation of this program created a sudden increase in the supply of skilled labor and had a direct impact on quality of education. Although we do not claim that 100% of the decline between 2002 and 2008 can be linked to this program, we provide ample evidence that a good part of the falling returns can be linked to Mission Sucre. Specifically, we show that for a 1% increase in the share of Mission Sucre students in the state, returns to university level of education declined by about 5.6 percentage points between 2007 and 2008.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4206.

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Length: 50 pages
Date of creation: Jun 2009
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Handle: RePEc:iza:izadps:dp4206

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Related research
Keywords: human capital; Venezuela; policy reform; returns to education; schooling;

Find related papers by JEL classification:
J2 - Labor and Demographic Economics - - Demand and Supply of Labor
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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References listed on IDEAS
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  1. Fleisher, Belton M. & Sabirianova, Klara & Wang, Xiaojun, 2005. "Returns to skills and the speed of reforms: Evidence from Central and Eastern Europe, China, and Russia," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 351-370, June. [Downloadable!] (restricted)
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  2. Patrinos, Harry Anthony & Ridao-Cano, Cris & Sakellariou, Chris, 2006. "Estimating the returns to education : accounting for heterogeneity in ability," Policy Research Working Paper Series 4040, The World Bank. [Downloadable!]
  3. Baland, Jean-Marie & Francois, Patrick, 2000. "Rent-seeking and resource booms," Journal of Development Economics, Elsevier, vol. 61(2), pages 527-542, April. [Downloadable!] (restricted)
  4. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
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  5. Aaron Tornell & Philip R. Lane, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March. [Downloadable!] (restricted)
  6. Psacharopoulos, George & Alam, Asad, 1991. "Earnings and education in Venezuela: An update from the 1987 household survey," Economics of Education Review, Elsevier, vol. 10(1), pages 29-36, March. [Downloadable!] (restricted)
  7. Patrinos, Harry Anthony & Sakellariou, Chris, 2004. "Economic volatility and returns to education in Venezuela : 1992-2002," Policy Research Working Paper Series 3459, The World Bank. [Downloadable!]
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  8. Lane, Philip R & Tornell, Aaron, 1996. " Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-41, June.
  9. Gorodnichenko, Yuriy & Sabirianova Peter, Klara, 2005. "Returns to schooling in Russia and Ukraine: A semiparametric approach to cross-country comparative analysis," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 324-350, June. [Downloadable!] (restricted)
    Other versions:
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