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Economic Freedom, Human Rights, and the Returns to Human Capital: An Evaluation of the Schultz Hypothesis

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Listed:
  • King, Elizabeth M.
  • Montenegro, Claudio E.
  • Orazem, Peter F.

Abstract

Hundreds of studies measure the private returns to schooling, most focusing on a single country or a subset of countries. Following Mincer (1974), inference on returns to schooling and work experience are derived from the regression coefficients of log earnings on years of schooling and quadratic terms in age. Due mainly to George Psacharopolous and his colleagues (Psacharopoulos 1973, 1994; Psacharopoulos and Patrinos 2004), we have compilations of estimated returns to schooling across many countries. These estimates show remarkable consistencies. Despite differences in estimation methods, specifications, and level of economic development, virtually all studies show that earnings rise with years of schooling and increase at a declining rate in age or work experience.1 In almost all data sets, the largest percentage annual wage gains are captured by the youngest workers. The wage gain from additional experience gets smaller and may even turn negative with age.

Suggested Citation

  • King, Elizabeth M. & Montenegro, Claudio E. & Orazem, Peter F., 2012. "Economic Freedom, Human Rights, and the Returns to Human Capital: An Evaluation of the Schultz Hypothesis," ISU General Staff Papers 201210010700001269, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201210010700001269
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    1. Economic Freedom and Returns to Human Capital
      by UDADISI in UDADISI on 2012-09-11 17:52:00

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    Cited by:

    1. Jin, Hyun Joung & Kim, Jang-Chul & Su, Qing, 2025. "Economic freedom and market resilience: Safeguarding liquidity in times of crisis," Journal of Multinational Financial Management, Elsevier, vol. 79(C).
    2. Laporšek, Suzana & Orazem, Peter F. & Vodopivec, Milan & Vodopivec, Matija, 2021. "Winners and losers after 25 years of transition: Decreasing wage inequality in Slovenia," Economic Systems, Elsevier, vol. 45(2).
    3. Johan Graafland & Harmen Verbruggen, 2022. "Correction to: Free-Market, Perfect Market and Welfare State Perspectives on “Good” Markets: an Empirical Test," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 17(2), pages 1187-1187, April.
    4. Susan Godlonton, 2020. "Employment Exposure: Employment and Wage Effects in Urban Malawi," Economic Development and Cultural Change, University of Chicago Press, vol. 68(2), pages 471-506.
    5. Boudreaux, Christopher J. & Nikolaev, Boris N. & Klein, Peter, 2019. "Socio-cognitive traits and entrepreneurship: The moderating role of economic institutions," Journal of Business Venturing, Elsevier, vol. 34(1), pages 178-196.
    6. Jacobi, Daniel & King, Elizabeth M. & Montenegro, Claudio & Orazem, Peter, 2025. "Governance, Risks, and Returns to Human Capital," ISU General Staff Papers 202504141344270000, Iowa State University, Department of Economics.
    7. Olalekan Charles Okunlola & Anthony E. Akinlo, 2021. "Does economic freedom enhance quality of life in Africa?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 68(3), pages 357-387, September.
    8. Imed Limam & Abdelwahab Ben Hafaiedh, 2017. "Education, Earnings and Returns to Schooling in Tunisia," Working Papers 1162, Economic Research Forum, revised 12 Jun 2017.
    9. Montenegro, Claudio E. & Patrinos, Harry Anthony, 2014. "Comparable estimates of returns to schooling around the world," Policy Research Working Paper Series 7020, The World Bank.
    10. Jacobi, Daniel & King, Elizabeth M. & Montenegro, Claudio & Orazem, Peter, 2025. "Governance, Risks, and Returns to Human Capital," ISU General Staff Papers 202504141344270000, Iowa State University, Department of Economics.
    11. Ibrahima Dia & Henri Atangana Ondoa & Idrissa Ouedraogo, 2024. "Does economic freedom foster education in Sub‐Saharan Africa?," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(2), pages 939-972, March.
    12. Mohammad Mainul Hoque & Elizabeth M. King & Claudio E. Montenegro & Peter F. Orazem, 2019. "Revisiting the relationship between longevity and lifetime education: global evidence from 919 surveys," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(2), pages 551-589, April.
    13. Zafiris Tzannatos & Ishac Diwan & Joanna Abdel Ahad, 2016. "Rates of Return to Education in Twenty Two Arab Countries: an Update and Comparison Between MENA and the Rest of the World," Working Papers 1007, Economic Research Forum, revised May 2016.
    14. Horst Feldmann, 2021. "Economic Freedom and People’s Regard for Education," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 154(1), pages 235-256, February.
    15. Elena D’Agostino & Marco Alberto De Benedetto & Giuseppe Sobbrio, 2023. "Does the economic freedom hinder the underground economy? Evidence from a cross-country analysis," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 319-341, April.
    16. Angrist, Noam & Patrinos, Harry Anthony & Schlotter, Martin, 2013. "An expansion of a global data set on educational quality : a focus on achievement in developing countries," Policy Research Working Paper Series 6536, The World Bank.
    17. Johan Graafland, 2020. "When Does Economic Freedom Promote Well Being? On the Moderating Role of Long-Term Orientation," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 149(1), pages 127-153, May.
    18. Heather Congdon Fors, 2017. "Globalization and school enrollment in a panel of countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(3), pages 295-315, April.
    19. Dean, James & Geloso, Vincent, 2024. "Poverty spells and economic freedom: Canadian evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 282-296.
    20. Marek Loužek, 2022. "Přínos Theodora Schultze k rozvoji ekonomické teorie [Theodore Schultz's Contributions to Economic Theory]," Politická ekonomie, Prague University of Economics and Business, vol. 2022(6), pages 730-748.
    21. Olalekan C. Okunlola & Olumide A. Ayetigbo, 2022. "Economic Freedom and Human Development in ECOWAS: Does Political-Institutional Strength Play a Role?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 1751-1785, September.
    22. Elizabeth M. King & Claudio E. Montenegro & Peter F. Orazem, 2012. "Economic Freedom, Human Rights, and the Returns to Human Capital: An Evaluation of the Schultz Hypothesis," Economic Development and Cultural Change, University of Chicago Press, vol. 61(1), pages 39-72.
    23. Lant Pritchett, Justin Sandefur, 2013. "Context Matters for Size: Why External Validity Claims and Development Practice Don't Mix-Working Paper 336," Working Papers 336, Center for Global Development.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General

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