Abstract
One of the biggest economic benefits of schooling are labor market earnings. For many people, education and experience are their only assets. This is why I believe that it’s very important to know the economic benefits of investments in schooling. The rate of return equates the value of lifetime earnings to the net present value of costs of education. For an investment to be justified, the returns should be positive and higher than the alternative. For the individual, weighing costs and benefits means investing as long as the rate of return exceeds the private discount rate.
Highlights
One of the biggest economic benefits of schooling are labor market earnings
Education and experience are their only assets. This is why I believe that it’s very important to know the economic benefits of investments in schooling
The returns are highest in Sub-Saharan Africa, namely in Ethiopia, South Africa and Tanzania
Summary
The global private rate of return to schooling is 10% for every year of schooling. This recent estimates comes from data from 139 economies. The returns are highest in Sub-Saharan Africa, namely in Ethiopia, South Africa and Tanzania. The returns are lowest in the Middle East and North Africa. While the relationship between schooling and earnings does not necessarily imply causality, evidence from natural experiments to increase schooling confirm that the effect of ability and related factors does not have a significant impact on the general results for returns to education. I believe that schooling does impart skills that enhance productivity. Increases in earnings are due to the increased productivity brought about by investments in human capital
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