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Self-employment earnings and returns to education in rural Peru

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  • Sonia Laszlo

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.

Suggested Citation

  • Sonia Laszlo, 2005. "Self-employment earnings and returns to education in rural Peru," Journal of Development Studies, Taylor & Francis Journals, vol. 41(7), pages 1247-1287.
    • Handle: RePEc:taf:jdevst:v:41:y:2005:i:7:p:1247-1287
    DOI: 10.1080/00220380500170915
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    Cited by:

    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.
    2. Takashi KUROSAKI & Seiro ITO & Nobuhiko FUWA & Kensuke KUBO & Yasuyuki SAWADA, 2006. "Child Labor And School Enrollment In Rural India: Whose Education Matters?," The Developing Economies, Institute of Developing Economies, vol. 44(4), pages 440-464, December.
    3. Bairagya Indrajit, 2020. "Returns to education in self-employment in India: A comparison across different selection models," WIDER Working Paper Series wp2020-5, World Institute for Development Economic Research (UNU-WIDER).
    4. Kondo, M., 2018. "Schooling and Within-Sector Labor Productivity Outcome in Uganda: Joint Estimation of Returns to Education and Labor Supply," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277473, International Association of Agricultural Economists.
    5. Indrajit Bairagya, 2020. "Returns to education in self-employment in India: A comparison across different selection models," WIDER Working Paper Series wp-2020-5, World Institute for Development Economic Research (UNU-WIDER).
    6. Vasco, Cristian & Tamayo, Grace Natalie, 2017. "Determinants of non-farm employment and non-farm earnings in Ecuador," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    7. Hu, Feng, 2015. "Return to Education for China’s Return Migrant Entrepreneurs," World Development, Elsevier, vol. 72(C), pages 296-307.
    8. Jonasson, Erik & Helfand, Steven M., 2010. "How Important are Locational Characteristics for Rural Non-agricultural Employment? Lessons from Brazil," World Development, Elsevier, vol. 38(5), pages 727-741, May.

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