Education and earnings in Paraguay

Abstract The analysis presented in this paper, the first for Paraguay, uses data from the 1990 Household Survey to analyze the relationship between education and earnings, and to calculate rates of return to investment in education at different levels. The results are consistent with what has been found in other countries with similar socioeconomic characteristics. Human capital characteristics account for about 40% of individual earnings variance; each extra year of schooling yields a private rate of return of 11.5%. Social and private rates of return are highest for primary education, followed by secondary education, and females experience a higher rate of return to schooling than do males. Additionally, private sector employees have a 3.6% earnings advantage over public sector employees. Once more, the self-employed, mostly working in the informal sector, realize returns similar to, or even higher than, those engaged in more conventional employment. Inequalities relating to linguistic and socioeconomic background are also documented. The main implication of the findings is that improving and expanding primary and secondary schooling would be the most efficient and profitable education investments.