Economic Returns to Schooling and Skills – An Analysis of India and Pakistan

The study aims to evaluate the economic or labor market outcome of acquiring skills and education in the two neighboring countries namely India and Pakistan and investigates the relationship that might exist between schooling and cognitive skills and choice of occupation and the subsequent increase in earnings. Purpose-designed household survey (2007-2008) was conducted in various districts of N.W.F.P and Punjab in Pakistan and in various districts of Madhya Pradesh (MP) and Rajasthan within India. Application of Multinomial Logit (MNL) models of occupational attainment and Mincerian earnings functions reveals that education and skills in English language have a positive impact on access to lucrative job market, occupational earning and cognitive skills although gender disparity continues to persist. Acquiring education in rural areas significantly increases the chances of withdrawing from the agricultural labor force and in urban areas education enhances the ability to enter into lucrative markets, although these benefits are far more for men than for women despite the fact that women have a higher rate of return from education.

The study reveals that education plays an important role in enhancing returns to agriculture and self employment and the education-earnings relationship is convex in India and Pakistan indicating increasing returns to higher education. The study concludes that cultural norms continue to prevent female masses from taking advantage of education and this gender gap is more visible in Pakistan as opposed to India.