Returns to Education in Low and Middle-Income Countries: Evidence from the Living Standards and Measurement Surveys

While a large literature has investigated the returns to education in high-income countries, evidence on returns in less developed countries is relatively scarce. We pool 61 nationally representative household surveys conducted between 1985 and 2012 in order to address this evidence gap and to estimate average national and regional returns to education. We find a return of 6.5% in the pooled data, with lower returns in rural areas, higher returns for females, higher returns in the years prior to 2000, and lower rates of return in Asian countries compared to Africa, Latin America, and Eastern Europe. With respect to schooling levels, we find lowest returns for primary education, and highest returns to tertiary education, consistent with recent evidence from developed countries. Overall, returns to education in developing countries seem to be similar or lower than those in high-income countries with remarkably large amounts of heterogeneity across countries, time, and regions.While a large literature has investigated the returns to education in high-income countries, evidence on returns in less developed countries is relatively scarce. We pool 61 nationally representative household surveys conducted between 1985 and 2012 in order to address this evidence gap and to estimate average national and regional returns to education. We find a return of 6.5% in the pooled data, with lower returns in rural areas, higher returns for females, higher returns in the years prior to 2000, and lower rates of return in Asian countries compared to Africa, Latin America, and Eastern Europe. With respect to schooling levels, we find lowest returns for primary education, and highest returns to tertiary education, consistent with recent evidence from developed countries. Overall, returns to education in developing countries seem to be similar or lower than those in high-income countries with remarkably large amounts of heterogeneity across countries, time, and regions. JEL Codes: