Rates of Returns to Education and the Determinants of Earnings in Pakistan (Issues IN Demography) (Report‪)‬

This paper is a straightforward exercise in estimating earnings functions and computing the private rates of returns to different levels of education. The latter summarizes the incentives to the individual to invest in human capital formation, while the former helps in ascertaining the influence of both human and non-human capital variables on the earnings of the individual. A few studies conducted in the past found the rates of returns to education in Pakistan not in conformity with those of the majority of the developing countries for which such estimates exist. The estimated rates were lower for all levels of education in Pakistan than in the developing world. Moreover, the computed rates of returns had a positive association with the level of education. In this paper updated estimates, using a larger, more recent and nationally representative data set, are presented to see if this phenomenon still persists. The paper is divided into two sections. The estimated earnings functions are presented and discussed in the first section. In the second section the rates of returns derived from them are analysed in the context of earlier findings for both Pakistan and the developing countries. Owing to space constraints, there is little discussion of methodological issues. The original and more standard sources have been referred to for the interested reader.