Compulsory Schooling and Early Labor Market Outcomes in a Middle-Income Country

The 1997 reform in Turkey which extended compulsory schooling from 5 to 8 years provides an opportunity to estimate the returns to schooling in a middle-income country. The availability of a rich set of early labor market variables also provides an opportunity to assess mechanisms through which returns to schooling occur. I find quite small effects of compulsory schooling on earnings of men but large positive effects on earnings of women who work, without raising their overall low rate of labor force participation. In terms of mechanisms, I find that women who worked moved into higher skill and formal sector jobs, which involved more complicated tasks on average. I propose that differential marginal costs of schooling explain the low average schooling level among women before the reform and the very different outcomes of the reform for men and women.