Table of contents

1.0 Introduction……………………………………………………………………………………1

2.0 Data description………………………………………………………………………………..2

3.0 Estimation procedures…………………………………………………………………………4

3.1 The earnings function method………………………………………………..………..5

3.2 The full discounting method…………………………………...………………………5

4.0 Empirical methodology………………………………………………………………………..6

4.1 LSMS Data…………………………………………………………………………….6

4.2 Empirical model……………………………………………………………………….7

5.0 Table 1. Returns to Education for Countries, Years: Africa…………………………………...8

5.1 Table 2. Returns to Education for Countries, Years: Asia…………………………….9

5.2 Table 3. Returns to Education for Countries, Years: Eastern Europe…………………9

5.3 Table 4. Returns to Education for Countries, Years: Latin America…………………..9

6.0 Results………………………………………………………………………………………..10

7.0 Conclusion……………………………………………………………………………………12

8.0 References……………………………………………………………………………………13
Abstract

In this paper, 61 nationally representative Living Standards and Measurement Study (LSMS)
surveys run by the World Bank in collaboration with national governments and statistical offices
conducted between the years 1985 and 2012 were pooled. This method was employed in order to
tackle the evidence gap that exists due to scarcity of information on returns to education in
developing countries which is largely due to the majority of researches concentrating on returns
to education in developed countries (Fink and Peet 2014). They evaluated the results against OLS
estimates derived from the standard Mincerian equation. A conclusion was made with a return of
6.5% in the pooled data-set with higher returns for females and also for the years prior to the year
2000, and also consequently lower returns in rural areas. Asia had the lowest returns amongst the
four geographical regions namely Africa, Asia, Eastern Europe and Latin America. Another
conclusion was also similar returns in comparison to developed countries with respect to primary
education and tertiary education yielding the lowest and highest returns respectively. With
extremely high levels of variation between nations, periods of time, and geographic regions,
returns to education in developing nations appear to be identical to or lower than those in
developed countries globally.

Key words: LSMS; returns to education; evidence gap; developing countries; variation
1.0 Introduction

One of the most popular economic assessments, the returns to education, has a long history that
dates back to the late 1950s. Although a limited number of studies (Psacharopoulos 1981,
Psacharopoulos 1985, Psacharopoulos 1989, Psacharopoulos 1994, Psacharopoulos and Patrinos
2002) have attempted to determine the benefits of education in low-income or developing
countries, the vast majority of more recent literature has concentrated on high-income or
developed countries (Card 2001). There may be a difference between the returns on investment in
education in high-income economies and that of developing countries due to differences in
capital stock and capital investment, a shortage of advanced technology, or more limiting access
to education (Psacharopoulos 1973, Kang 1993, Todaro 1989).

Due to rising rates of globalization and migration, inequalities in capital stock and production
technology have been reducing recently (Fischer 2003, Ghose 2004, UNCTAD 1999, World
Bank 2001). As a result of the inclusion of education in the Millennium Development Goals, as
well as the widespread acceptance of human capital investment as a critical strategy for fostering
economic development (Schultz 1994, Romer 1989, World Bank 1982), school enrollment,
literacy rates, and other indicators of human capital have all increased significantly over the same
period of time (UNESCO 1999, World Bank 1982). (Nelson and Phelps 1966).

There is a lack of recent, systematic data on the benefits of education in developing nations. The
empirical data on the returns to education in developing countries is surprisingly limited, despite
the claims made by Card (2001) and Duflo (2001) that they are more likely to be higher than in
industrialized nations. The majority of the evidence for developing countries is based on the work
of George Psacharopolous and colleagues (Psacharopoulos 1981, Psacharopoulos 1985,
Psacharopoulos 1989, Psacharopoulos 1994, Psacharopoulos 1994), as well as Psacharopolous
and Patrinos (Psacharopoulos and Patrinos 2002, Patrinos and Psacharopoulos 2010). They
provide an overview of the research on the benefits of education in developing nations up to the
1990s. According to other assessments analyzing the estimated returns in developing countries,
the evidence is either ambiguous or the returns are overestimated (Behrman and Birdsall 1987,
Strauss and Thomas 1998).

The challenge of gathering income data in low-resource settings is one of the main reasons why
research on the returns of education is lacking. In many household surveys conducted in
developing nations, the primary indicator of socioeconomic position is the possession of
household assets (Strauss and Thomas 1998). The Living Standards and Measurement Study
(LSMS) surveys, which the World Bank conducts in conjunction with national governments and

1
statistical offices, are the most significant exception to this general approach. LSMS are
nationally representative household surveys that specifically examine household income and
poverty (Grosh and Glewwe 1998).

The main focus of this paper is to estimate the returns to education in 25 low to middle-income
countries, as well as regional average estimates for Africa, Asia, Eastern Europe, and Latin
America, using all 61 publicly available and nationally representative LSMS surveys conducted
between 1985 and 2012 containing individual income and education data.

2.0 Data description

The estimated return on investment for education is 6.5% when all the countries and
LSMS survey years are combined. The most significant returns of 8.0% per year of schooling are
found in Latin America, followed by returns of 6.8% in Eastern Europe, returns of 6.7% in
Africa, and only 1.9% in Asia. There is also a gender gap in the returns to education that favors
females – on average, there is a return of 7.2% for females and only 5.9% for males.
When the years of schooling are segmented into primary, secondary, and tertiary, the most
significant returns are found for tertiary education. In particular, primary education generates
returns of 4.9% on average for each year of completion, secondary education generates returns of
5.4% on average for each year of completion, and tertiary education generates returns of 6.5% on
average for each year of completion. The returns for all surveys conducted before the year 2000
are 7.3%, and the returns for all surveys conducted during and after the year 2000 are 6.1%.
These patterns conceal a significant amount of regional variation, with returns remaining stable at
high levels in Africa and Latin America, further dropping in Asia, and significantly rising in
Eastern European countries. The aggregate estimates for the pooled sample of developing
nations, as well as the estimates for individual regions are much lower than the 10–11% indicated
in the developing country study (Psacharopoulos and Patrinos 2002). Psacharopoulos and
Patrinos (2002) conducted the broadest analysis to date, summarizing returns to education from
83 high- and low-income nations from data spanning the years 1958 to 1999. They found that
returns ranged from 2.7% (Italy, 1987) to 28.8% (Jamaica, 1989) per year. Regionally, Latin
America and Sub-Saharan Africa had the highest returns on education (12 and 11.7%,
respectively).
In comparison, Asia had a 9.9% return on investment, and Europe, the Middle East, North Africa,
and OECD nations had less than 7.5% returns. In comparison, the results for the years up to and
including 1999 (7.3%) are greater than later returns (6.1%) but significantly lower than the results
of Psacharopoulos and Patrinos (2002). The findings of this study indicate lower total returns but

2
an identical geographic arrangement (highest returns in Latin America and lowest returns in
Asia).
The findings in this study appear to differ from those of Psacharopoulos and Patrinos (2002), who
find that primary education has the highest returns (18.9%) and tertiary education has the lowest
returns (10.8%). This finding was also reached by Colclough, Kingdon, and Patrinos (2009). This
research shows that this pattern is the opposite, with tertiary education yielding the highest
returns. However, the trends revealed by this study are in line with more recent data emphasizing
the (non-linearly) increasing returns to education throughout educational levels and years
(Schultz 2004, Kingdon et al. 2008). Moll (1998) shows that African educational institutions
provide cognitive skills that boost labor market results, with a 3% rise from primary school, a 9%
increase from secondary school, and a significant 54% increase from university education,
notwithstanding segregation. The public-private wage gap is evaluated using LSMS data from
Cote d'Ivoire (van der Gaag and Vijverberg 1989) and Peru (Stelcner et al. 1989). The findings
show that context matters when compared since higher levels of education are highly rewarded in
the private sector labor market of Peru but returns to education in the public sector in Cote
d'Ivoire are often greater than those in the private sector.

The contribution of this study to the literature is the provision of a collection of standardized
returns to education estimates from similar representative household surveys across developing
countries. Although a wide range of highly diverse models has been studied in the literature, Fink
and Peet (2014) employed a simple OLS specification for the entire sample. Conceptually, this
OLS approach's fundamental flaw is its inability to control for a substantial number of potential
missing factors, with intrinsic ability most likely constituting the single most significant variable
of concern. OLS will consistently overstate the real causal influence of schooling if it is true that
ability is positively correlated with education and independently results in better wages.
Numerous studies have examined this issue analytically, examining a variety of tools such as
modifications to schooling regulations (Harmon and Walker 1995), proximity to colleges (Card
1995), and birth quarters (Angrist and Krueger 1991). Surprisingly, the majority of IV
estimations seem to be higher than the equivalent OLS estimates, indicating that OLS may
underestimate the actual returns to education. Education measurement inaccuracy or highly
heterogeneous returns to education and local average treatment effects (LATE) representing the
returns to education of only the subsample for whom the IV generates changes in years of
education are other possible explanations for this situation (Angrist and Imbens 1995). The
calculated returns exceed the average treatment effects, and the distinctive returns to education
for this subsample are conceivably greater than those not affected by the IV (Heckman 1997).
The findings in this paper represent estimated relationships between education and labor market
earnings depending on factors like age, experience, and whether a person lives in an urban or

3
rural area. These relationships may not accurately reflect the marginal benefits of education for
the targeted populations or subpopulations of interest. Variations can be found in the association
between education and income across population strata, variations among nations and regions,
and variations over time by employing a highly standardized model.

3.0 Estimation procedures

It is a global truth that, in every country, the more education a person has, the more money they
will earn. According to Mincer's (1974) groundbreaking theoretical and empirical work, age-
earnings profiles by educational level behave as expected.

Based on such information, coupled with the direct cost of education, two types of returns are
usually estimated, each providing an answer to a different question: The private rate of return is
the first factor to consider when comparing the costs and returns of investing in education for
each student. Second is the social rate of return, which weighs costs and benefits from the
perspective of the society or nation. The primary computational distinction between social and
private rates of return is that, in calculating a social rate of return, the costs also consider what
the society or state as a whole spends on education. As a result, expenses like professorial salaries
and building rentals would be included. A social rate of return calculation uses gross earnings
(i.e., earnings before taxes and other deductions), and if this information is available, gross
earnings should also include income in kind. The term "narrow-social" refers to social returns to
education that do not take externalities into account, whereas "wide-social" refers to returns that
do. The difference between narrow and wide social returns goes beyond mere theory. One can
arrive at diametrically opposite policy results by adding externalities to the narrow-social returns.
For instance, if primary and tertiary education have different externalities, the ranking of
lucrative education investments could be altered by considering these factors.

The aforementioned earnings differentials can be used to calculate the returns on education
investment using the appropriate approach. The vast majority of publications on the rate of
returns to education are based on the Mincerian earnings function (Mincer,1974), the most
commonly employed estimation in economics (for a review of the Mincerian earnings function,
see Heckman et al. 2006; Patrinos 2016). However, the "full discounting approach," which is
based on the natural shape of the age-earnings profiles rather than being smoothed out by an
earnings function, is the most accurate methodology (Psacharopoulos and Mattson, 1998).
There are two fundamental estimation procedures computationally:

4
3.1 The earnings function method

This approach, often referred to as Mincerian, entails fitting a function of log-wages (LnY) using
the independent variables years of schooling (S), years of work experience (EX), and its square. It
is referred to as a "basic earnings function." No matter what academic level this year of schooling
refers to, the coefficient on years of schooling in the semi-log specification can be understood as
the average private rate of return to one additional year of schooling.
The fundamental earning function of the Mincerian is as follows:

This is the rate of return to the marginal year of schooling or the relative
rise in wages resulting from an increase in S.
This method only calculates private returns to schooling since the only costs in this scenario are
foregone earnings.

3.2 The full discounting method

By determining the rate of discount (r) that equalizes the stream of discounted benefits (Y) over
time (t) to the stream of costs (C) at a specific moment in time, the social rate of return on
investment in a specific level of education may be computed. For instance, the formula is as
follows for a 42-year working life and a four-year university education:

Where (𝑌𝑢 − 𝑌𝑠)t represents the earnings differential between a university graduate (subscript u)
and a secondary school graduate (subscript s, the control group) at time t. Buildings, salaries, and
other direct costs of attending a university are represented by Cu, and the student's foregone
wages or indirect costs are represented by Ys.

An important presumption in calculating a societal rate of return is that observed wages serve as a
reliable substitute for the marginal product of labor. When civil servants are included in the
sample, this is not always the case. Therefore, a sub-sample of workers in the private sector of the
economy, where wages are more likely to relate to output, might be matched with the earnings
function.

5
4.0 Empirical Methodology
4.1 LSMS Data

Data from 61 Living Standards Measurement Study surveys spanning 25 countries was used to
conduct this study (Fink and Peet 2014). The World Bank created the Living Standards
Measurement Study (LSMS) initiative in the 1980s to enhance the precision, timeliness, and
policy relevance of household survey data gathered by national statistical offices in developing
countries. Each survey is the product of cooperation between the World Bank and the national
statistical agency, and the majority of the time, the data is made available to the public. The main
goal of LSMS is to gather information on many aspects of family well-being in order to assess
household welfare, comprehend household behavior, and maybe estimate the impact of
governmental initiatives (Grosh and Glewwe 1998). LSMS surveys often use multistage
probability samples of households to conduct nationwide surveys. The normal sample sizes vary
from 2,000 to 5,000 households (Scott et al. 2005). Although great efforts were made to gather
information from all LSMS surveys, the number of surveys contained in this study is constrained
by four factors: first, some of the studies do not contain the necessary data, second, requests to
local statistical offices housing the relevant information did not receive any feedback, third, the
surveys utilized in the current study are restricted to those available for free upon request, and
fourth, the assessments are not nationally representative.

A household questionnaire, a community questionnaire, and a price questionnaire make up the

three questionnaires that make up the standard LSMS survey. In the surveys, household
questionnaires gather a variety of income data in addition to the usual demographic data like
gender, age, and level of education (Grosh and Glewwe 1998). Income from primary and
secondary employment, the number of hours worked, the highest degree of education attained,
and the number of years within each level are frequently included in surveys. Each poll asks for
slightly different information; some ask about tertiary occupations, bonuses, in-kind transfers,
benefits, and other things. For the purposes of this study, earnings are considered as all income
from primary and secondary occupations, excluding benefits, in-kind transfers, and any possible
compensations for labor not directly attributable to these occupations. All earnings data were
additionally transformed into monthly estimates and restrict the analysis to workers having wage
income. Agricultural workers and those employed in the informal sector are not disregarded
when the analysis is restricted to wage and/or salary workers. This restriction, however, does not
apply to farm or other business owners or self-employed people who record profits or revenues
from their operations instead of wages or salaries, as long as those profits or revenues are not
solely due to the self-employed person reporting them.

6
The total number of years of education completed is utilized as the primary indicator of education
because primary, secondary, and tertiary education are all defined very differently depending on
the context.

Cross-referencing the monthly salaries and average educational attainment with data from the
World Development Indicators reveals that all surveys come very close to the national averages
for the corresponding time periods.

4.2 Empirical Model

Following the norm in the research, a conventional Mincerian wage equation is employed to
estimate the impact of education on earnings, where Y stands for wage or earnings, S for the
number of years of schooling completed, and X for potential experience (Heckman, Lochner et
al. 2006).

Ln(Y)=α+ρS+β1X+β2X2 +ε

A quadratic age term is used to represent potential experience X as is typical in the literature. The
coefficient of interest is ρ which expresses the percentage change in income resulting from a one-
year marginal change in level of education acquired, S.

Since OLS is used to estimate all models, there are two conflicting sources of bias that may
contribute to the ambiguity in the empirical literature on the bias of OLS estimates. These sources
are attenuating measurement error bias and positive ability and comparative advantage biases.
However, the majority of the literature concedes that the overall OLS bias is positive because
measurement error in education is mean-regressive, meaning that people with the highest level of
education cannot report positive errors and those with the lowest level of education cannot report
negative errors (Angrist and Krueger 1999, Card 2001, Griliches 1977). Unfortunately, there
aren't many ways to fix the bias in OLS. It is typically difficult to satisfy (and even more difficult
to demonstrate) the exclusion restrictions needed for the validity of IV instrumental variable (IV)
estimation; even if the instrument is legitimate, IV produces local average treatment effects
(LATE), which may reflect non-representative effects with diverse cost or return functions (Card
2001). Finding suitable instruments seems to be considerably more challenging for multi-country
research like the ones described here. The only variable that might be applied across nations is
birth quarter, however in low-income nations, it is difficult to find trustworthy information on
birth dates.

7
Considering these limitations, OLS is employed in this study to determine the relationships
between the number of school years and labor market earnings. Therefore, the given estimates
should not be taken as the causal effect of randomly adding one more year of education to each
person, but rather as a population-level conditional correlation between educational attainment
and income. As a result, the reported coefficients do not directly provide information on the
returns to education; rather, they simply describe the income differential observed across the
schooling gradient, which captures both the true causal effect of education as well as the impact
of a variety of personal and family traits that influence educational attainment as well as labor
market outcomes.

The Mincerian wage equation is first estimated independently by country and year. To estimate
the overall returns to education for low- and middle-income nations, the data for each country
and year are then combined. The returns to education are also calculated by subsample, including
pre- and post-2000, male and female, urban and rural, and gender. Estimations are made for the
returns to primary, secondary, and higher education in order to compare the findings of the
analysis with a sizable subsample of the literature. The geographic distribution of returns within
the low- and middle-income countries of Africa, Asia, Eastern Europe, and Latin America is
described by regional estimates.

5.0 Table 1. Returns to Education for Countries, Years: Africa

Source: Fink and Peet 2014

8
5.1 Table 2. Returns to Education for Countries, Years: Asia

Source: Fink and Peet 2014

5.2 Table 3. Returns to Education for Countries, Years: Eastern Europe

Source: Fink and Peet 2014

5.3 Table 4. Returns to Education for Countries, Years: Latin America

Source: Fink and Peet 2014

9
6.0 Results

The findings of the Mincerian wage equation estimation are shown in Tables 1, 2, 3, and 4 for
each survey (country and year) by geographical region. Results for African countries Cote
d'Ivoire, Ethiopia, Ghana, Malawi, Niger, Nigeria, South Africa, Tanzania, and Uganda are
shown in Table 1. The regional pooled estimates result in a return of 6.7% for the countries in
Africa covered by LSMS surveys between 1985 and 2011. In Cote d'Ivoire, the lowest projected
return on a year of further schooling was 3.3% in 1988. Returns from the LSMS in Cote d'Ivoire
in previous years were between 5.1%, 7.4% and 6%. The highest return to an additional year of
education is shown by Ethiopia in 2011 (12.5%), with equally high percentages for Malawi,
South Africa and Uganda. When all poll results are combined for each country, Ghana has the
lowest rate (4.7%) and Ethiopia has the highest rate (12.5%).

The returns to education for Asian countries between 1991 and 2009 are shown in Table 2. An
estimated return to education in Asia, when all countries and years of LSMS surveys are
included is only 1.9%. The Kyrgyz Republic saw the highest return on investment in education
among these nations in 1998, at 9.7%. The Iraqi civil war of 2006–2007 (Fearon 2007), the
consistently declining quality of education (Buckland 2005), and the more than 31,000 attacks on
educational institutions between 2003 and 2008 (UNESCO 2010) all likely contributed to the
lowest return to education in Iraq in 2006, where an additional year of education only results in a
0.7% increase in earnings. Iraq is mostly to blame for the 1.9% regional return estimates. The
estimated returns rise to 3.4% if Iraq is taken out of the regional pooled sample, but they still
represent the lowest returns of any region.

Table 3 shows the returns to education for Eastern European countries between 1995 and 2007.
Although most estimates fall between 5% and 8.5%, the returns to education for these countries
and years range from 0.2% to 10.9%. An estimated return to education of 6.8% is obtained in
Eastern Europe when all the nations and LSMS survey years are combined. Bulgaria recorded the
lowest return on schooling for these nations and years in 1997, a year of crisis. In Bulgaria, the
returns to an additional year of study were 4.8%, 5.3%, and 4.9% in 1995, 2001, and 2007,
respectively; the 0.2% return in 1997 is therefore a notable anomaly. Serbia experienced the
highest estimated return in 2007. In Serbia, returns to education increased steadily over the years
2000, 2002, 2003, and 2007, from 2% in 2000 to 7% in 2002, 9.4% in 2003, and 10.9% in 2007.
The increase in educational returns from 2000 to 2007 reflects Slobodan Milosevic's overthrow in
October 2000 and the accompanying economic reforms that led to a sharp increase in GDP per
capita (IMF 2010).

10
For the Latin American nations of Brazil, Ecuador, Guatemala, Nicaragua, Panama, and Peru, the
returns to education are shown in Table 4 for the period 1985–2008. The average returns to
education for these countries and years is projected to be between 6.5% and 11%; but even so, the
least return is 0.2% and the largest return is 13.7%, both of which occurred in Peru. An estimated
8% return to education is obtained in Latin America when all the countries and LSMS survey
years are combined. From 13.7% in 1985 to 6.8% in 1991 and 0.2% in 1994, the estimated
returns to education in Peru have been declining steadily. Panama demonstrated the highest and
most consistent returns to education among Latin American countries, along with GDP growth
rates that were higher than those of all other Latin American nations (BTI 2012).

The marginal returns for each year of schooling are generally increasing. Although the
confidence interval contains negative values and the marginal return occasionally drops close to
0, all estimated marginal returns are still larger than or equal to 0. The completion of secondary
education (12 years) and university education (16 years) yield the highest marginal returns.The
findings in this study show that the returns of developing countries are similar to or lower than
those of developed countries, contrary to previous studies that suggested that developing
countries' returns to education exceed those of developed countries because of underinvestment
in or improper allocation of educational subsidies. Card (2001), Psacharopoulos and Patrinos
(2002), among others, show that in the developed countries, returns to education are between 7%
and 8%. Estimates produced by the first specification, which ignores endogenous residential
sorting, are within the accepted range for developed nations. The anticipated return falls below
levels typical of estimates in developed economies when an urban/rural fixed impact is taken into
account. The most likely cause of the discrepancy between the results in this study and the
evaluations that have already been published is the upwards bias created by the extremely
selective samples (non-representative and firm surveys) prevalent to earlier studies of developing
nations (Psacharopoulos 1996, Bennell 1996, Psacharopoulos and Patrinos 2002). Furthermore,
the estimated returns to each level of education in this survey show that returns increase from
4.9% (primary) to 5.4% (secondary), and 6.5% (tertiary), in contrast to previous findings
demonstrating greater returns for primary education in developing countries (Psacharopoulos and
Patrinos 2002).

The overall sample returns in Africa are 6.7%, with higher returns for females (7.2% compared to
6.2% for men), urban residents (8.1% compared to 5.1% for rural residents), tertiary education
(4.8% for primary, 5.2% for secondary, and 7.3% for tertiary years of education), and pre-2000
years (8.5% for pre-1999 and 6.4% for post-2000). The returns for the entire sample are lower in
Asia (1.9%), higher for females (2.8% to 1.3%), somewhat higher for urban dwellers (1.9% to
1.7%), higher for tertiary education (1.3% compared to 0.9% and 1.7% for secondary and

11
primary respectively), and the highest for the years before 2000 (3.6% to 1.3%). The highest
regional returns (8.0%) are found in Latin America, along with greater female returns than male
returns (8.5% and 7.6%), higher returns in urban regions (8.2% and 7.1%), rising returns from
primary to tertiary levels (6.6% primary, 6.7% secondary, and 8% tertiary), and essentially no
difference between pre-1999 and post-2000 returns (8.1% and 7.9%). In terms of gender,
urban/rural location, and educational attainment, Eastern Europe follows the same trends as the
other regions (6.8% full, 5.9% male, 8.3% female, 6.5% urban, 6.1% rural, 5.7% primary, 5.3%
secondary, and 6.3% tertiary), but there is a noticeable difference in the returns by time period
(3% pre-1999, 7.2% post-2000). This divergence in trajectories is probably due to both the
relatively low rates of return in the post-communist transition years and the increasing demand
for human capital brought on by the acceleration of economic expansion after 2000.

7.0 Conclusion

In this study, estimations were made with conventional Mincerian wage equations across 25 low-
to middle-income countries using data from 61 nationally representative Living Standard and
Measurement Study surveys collected between 1985 and 2012 (Fink and Peet 2014). Although
there was regular findings for positive estimates, as hypothesized, evidence to support the idea
that developing countries experience higher average returns to education than developed
countries (Psacharopoulos and Patrinos 2002). According to the findings of this study,
completing one year of schooling is equivalent to a 6.5% gain in earnings in developing
countries. This total return estimate conceals a startlingly high level of education return variation.
This study revealed that South American return rates are often higher in rural regions and among
women than those in Asia, and that they are roughly twice as high overall as that of Asia.

The findings of this study generally indicate that returns to education in developing nations are
still positive, though they are probably currently less than those seen in established economies
like the US; in many places, particularly in the Asia area, they appear to have dipped below 5%.
This shows that either the quality of education has decreased or that growth in the supply of
human capital have been more rapid than the parallel growth in the demand, given that it is
highly implausible that the demand for human capital has decreased during the past few decades
(or both). Further reductions in the returns to education over the next years are likely given that
the majority of developing country governments are vigorously pursuing educational attainment
goals.

12
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