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Returns to endogenous education: the case of Honduras

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  • Arjun Bedi
  • Noel Gaston

Abstract

The rapid expansion of the education sector in developing countries and the scarcity of public funds have increased the need for an accurate evaluation of educational policies. Estimates of rates of return to education have often been used as an integral part of cost-benefit studies and programme evaluation efforts. This study uses household survey data from Honduras for 1990 to estimate returns to education that allow for worker heterogeneity and individual self-selection in the education process. A sequential estimation procedure is used that enables study of the interaction between educational attainment and earnings determination. It is found that accounting for endogenous educational attainment leads to substantially higher estimated returns to education (compared to traditional least squares estimates). The possible magnitude of the bias underscores the importance of recognizing the role of self-selection and comparative advantage in the education process.

Suggested Citation

  • Arjun Bedi & Noel Gaston, 1997. "Returns to endogenous education: the case of Honduras," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 519-528.
    • Handle: RePEc:taf:applec:v:29:y:1997:i:4:p:519-528
    DOI: 10.1080/000368497327010
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    References listed on IDEAS

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    1. Bedi, Arjun S. & Gaston, Noel, 1999. "Using variation in schooling availability to estimate educational returns for Honduras," Economics of Education Review, Elsevier, vol. 18(1), pages 107-116, February.
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    4. José Cuesta, 2008. "Does a Mature AIDS Epidemic Threaten Growth?," Research Department Publications 4567, Inter-American Development Bank, Research Department.
    5. Hongbin Li & Xianguo Yao & Junsen Zhang & Li-An Zhou, 2005. "Parental childcare and children's educational attainment: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 37(18), pages 2067-2076.
    6. T. -P. Chung, 2003. "Returns to education: updates for Malaysia," Applied Economics Letters, Taylor & Francis Journals, vol. 10(13), pages 837-841.
    7. Yih-chyi Chuang & Chen-Yeng Chao, 2001. "Educational choice, wage determination, and rates of return to education in Taiwan," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 7(4), pages 479-504, November.
    8. Chris Sakellariou, 2006. "Education policy reform, local average treatment effect and returns to schooling from instrumental variables in the Philippines," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 473-481.
    9. Moenjak, Thammarak & Worswick, Christopher, 2003. "Vocational education in Thailand: a study of choice and returns," Economics of Education Review, Elsevier, vol. 22(1), pages 99-107, February.
    10. José Cuesta, 2008. "¿Una epidemia de SIDA en su etapa madura es una amenaza para el crecimiento?," Research Department Publications 4568, Inter-American Development Bank, Research Department.

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