Earnings and Education Among Self-employed Males in Colombia*

Economics of education The theoretical cornerstone of the economics of education is productivity differences between workers with more or less education. However, given the difficulty of directly measuring worker productivity, empirical estimates have typically relied on earnings differences by level of education. Although such approximation may be valid in competitive labour market environments, it has understandably been criticised in the literature as having limited applicability in non-competitive economic environments. By restricting the observations to those in self-employment activities, one better approximates the elusive productivity differential. The self-employed simply receive as pay the true worth of what they produce (net of the returns to other factors they may use, like capital and raw materials). To put it in other words, focusing on the labour earnings of the self-employed corresponds to a natural, non-econometric shadow pricing of education as a factor of production.