Returns to education in India: Some recent evidence

Abstract

This paper estimates returns to education in India using a nationally representative survey. We estimate the standard Mincerian wage equation separately for rural and urban sectors. To account for the possibility of sample selection bias, Heckman two-step procedure is used. The findings indicate that returns to education increase with the level of education and differ for rural and urban residents. Private rates of returns are higher for graduation level in both the sectors. In general, the disadvantaged social groups of the society tend to earn lower wages. We find family background is an important determinant affecting the earnings of individuals. Using quantile regression method, we show the effect of education is not the same across the wage distribution. Returns differ considerably within education groups across different points of the wage distribution. Returns to education are positive at all quantiles. The results show that the returns are lower at the bottom quantiles and are higher at the upper quantiles.