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Beyond the mincer equation: the internal rate of return to higher education in Colombia

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  • García Suaza, Andrés Felipe

    ()

  • Guataqui, Juan Carlos

    ()

  • Guerra, José Alberto

    ()

  • Maldonado, Darío

    ()

Abstract

In order to present an estimation of the Internal Rate of Return (IRR) to higher education in Colombia we take advantage of the methodological approach provided by Heckman, Lochner and Todd (2005). Trying to overcome the criticism that surrounds interpretations of the education coefficient of Mincer equations as being the rate ofreturn to investments in education we develop a more structured approach of estimation, which controls for selection bias, includes more accurate measures of labor income and the role of education costs and income taxes. Our results implied a lower rate of return than the ones found in the Colombian literature and show that the Internal Rate ofReturn for higher education in Colombia lies somewhere between 0.074 and 0.128. The results vary according to the year analyzed and individual´s gender. This last result reinforces considerations regarding gender discrimination in the Colombian labor market.

Suggested Citation

  • García Suaza, Andrés Felipe & Guataqui, Juan Carlos & Guerra, José Alberto & Maldonado, Darío, 2009. "Beyond the mincer equation: the internal rate of return to higher education in Colombia," DOCUMENTOS DE TRABAJO 005745, UNIVERSIDAD DEL ROSARIO.
  • Handle: RePEc:col:000092:005745
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    References listed on IDEAS

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    1. Jhon James Mora, 2003. "Sheepskin effects and screening in Colombia," COLOMBIAN ECONOMIC JOURNAL, UN - RCE - CID, April.
      • Jhon James Mora, 2003. "Sheepskin effects and screening in Colombia," Colombian Economic Journal, Academia Colombiana de Ciencias Economicas, Colegio Mayor de Nuestra Senora del Rosario, Pontificia Universidad Javeriana, Universidad de Antioquia, Universidad de los Andes, Universidad del Valle, Universidad Externado de Colombia, Universidad Nacional de Colombia, vol. 1(1), pages 95-108, December.
    2. James J. Heckman & Lance J. Lochner & Petra E. Todd, 2003. "Fifty Years of Mincer Earnings Regressions," NBER Working Papers 9732, National Bureau of Economic Research, Inc.
    3. Ira N. Gang & Catherine Y. Co & Myeong-Su Yun, 2002. "Self-Employment and Wage Earning: Hungary During Transition," Departmental Working Papers 200219, Rutgers University, Department of Economics.
    4. Carlos Felipe Prada, 2006. "¿Es rentable la decisión de estudiar en Colombia?," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 24(51), pages 226-323, June.
    5. Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, Elsevier.
    6. Nohora Yulieth Forero Ramírez & Luis Fernando Gamboa Niño, 2007. "Cambios en los retornos de la educación en Bogotá entre 1997 y 2003," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 66, pages 225-250, Enero-Jun.
    7. Fabio Sanchez & Jairo Nunez, 2003. "A dynamic analysis of human capital, female work-force participation, returns to education and changes in household structure in urban Colombia, 1976-1998," Colombian Economic Journal, Academia Colombiana de Ciencias Economicas, Colegio Mayor de Nuestra Senora del Rosario, Pontificia Universidad Javeriana, Universidad de Antioquia, Universidad de los Andes, Universidad del Valle, Universidad Externado de Colombia, Universidad Nacional de Colombia, vol. 1(1), pages 109-149, December.
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    Cited by:

    1. Guataqui, Juan Carlos & García Suaza, Andrés Felipe & Rodríguez, Mauricio, 2009. "Estimaciones de los determinantes de los ingresos laborales en Colombia con consideraciones diferenciales para asalariados y cuenta propia," DOCUMENTOS DE TRABAJO 005756, UNIVERSIDAD DEL ROSARIO.
    2. Fabiola Saavedra & Mónica Ospina, 2014. "Decisions about Postsecondary Education, their returns in Colombia," DOCUMENTOS DE TRABAJO CIEF 012542, UNIVERSIDAD EAFIT.
    3. Felipe Lozano R., 2009. "Evaluating An Alternative To Finance Higher Education: Human Capital Contracts In Colombia," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, November.
    4. Baez, Javier E. & Camacho, Adriana, 2011. "Assessing the Long-term Effects of Conditional Cash Transfers on Human Capital: Evidence from Colombia," IZA Discussion Papers 5751, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Education returns; Mincer Equation; Internal Rate of Return; Colombia;

    JEL classification:

    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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