Evolution of Rates of Return to Schooling in Tunisia: 1980-1999

With reference to the theory of human capital, we estimate the Mincerian earnings functions based on individual data from national surveys of population and employment in 1980 and 1999. We show that the rates of return to education are, in 1980 and 1999, increasing proportionally with educational level. This growth of return rates means that the incentives for human capital accumulation continue to be strong. This result is general, it is observed for men and women, and in urban and rural areas. However, between 1980 and 1999, the average rate of return to education declined from 9.5% to 5.9%. Furthermore, this decline in the rates of return is general for all levels of education. This phenomenon affects the urban and rural areas as well as men and women. But the decline in the rate of return increases when the education level is low: the less the education level is, the bigger the decline in the rate of return is. This can result in a general deficiency in demand for labor by companies which seriously affects low qualified people. Following Heckman (1979), we re-estimate the earnings functions corrected for selection bias due to Mill's reversed ratio. The new findings of education return rates are superior to those obtained from the standard estimates. The results prove that education return rates increase when the education level increases; moreover, it explained the decline that happened between 1980 and 1999, which touched all education levels. However, the relative decrease in returns to education becomes larger in higher education levels; the lack of demand for labor would be felt more for the more educated.