The returns to higher education and public employment

Abstract

• I estimate the returns to higher education in a low-income setting. • I evaluate the effects of a rapid expansion in public universities in Ethiopia, exploiting geographical and time variation. • The expansion leads to a 4-percentage-point increase in higher-education attainment, 31% relative to baseline levels. • Higher-education attainment almost doubles the probability of entering paid employment and increases hourly wages by 80%. • The returns to higher education appear linked to occupational shifts to public administration. This paper evaluates a rapid expansion in public universities in Ethiopia to estimate the returns to higher education in a low-income context. The empirical analysis exploits the geographical and time variation in the expansion. The estimates suggest that higher-education attainment almost doubles the probability of paid employment and almost doubles hourly wages. The returns are linked to occupational shifts to the public sector, which is characterized by attractive wages and demand for higher levels of education.