Why Brazil fell behind in college education

Abstract Brazil fell behind in higher education attainment for the cohorts born in the 1950s and 1960s. We jointly model educational choices, labor force participation and wages, and compute the average, marginal and internal rate of returns to schooling after controlling for changes in ability composition at all levels of education. We find very high returns to college, which indicate that the disappointing trend in higher education could reflect binding credit constraints, psychic costs or uncertainty about future earnings gains from schooling.