Abstract
There is no doubt that education is the key to development. An important step in evaluating the condition of education in a society is to estimate the rate of return to education in that society. This paper estimates the private rate of return to schooling for men born in 1951–1983 in Iran using a pseudo-panel fixed-effect model. This is the first study that measures unbiasedly the rate of return to schooling in Iran. We construct the pseudo-panel data using six repeated cross sections of Household Expenditures and Income Surveys between 2008 and 2013. Our estimates show that the overall rate of return is around 9% based on the pseudo-panel fixed-effect approach. The estimates reveal a downward bias in ordinary least squares with individual data. This study also evaluates the rate of return to education in rural and urban areas. The rate of return in urban and rural areas is about 7.8 and 10%, respectively.
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