Changes in Returns to Education in Pakistan: 1990-2002

Abstract

This paper examines the trends in marginal rates of return to various levels of education for paid employees and how rewards for additional investments at a particular level of education has changed over time. Although the findings are indicative of increasing returns at different educational levels (excluding Graduation) over the years, we find no evidence that additional investments at successive levels bring consistently higher returns as highlighted by certain previous studies in Pakistan. The changes in returns at the primary and pre secondary levels have been found to be miniscule, taking the time span into consideration. The paper has also examined the returns to education between males and females and across urban and rural areas in view of the large disparities that exist by gender and region. Our findings indicate that although the wage structure may be biased in favour of males, additional investments made in female education accrue higher returns in comparison to males. Moreover, higher education is better rewarded in the urban areas whereas medium of instruction is a significant indicator of earning differentials in the abour market.