Uncertain educational returns in a developing economy

This paper estimates the distribution of educational returns by gender for India. While previous studies focus on mean returns, the variance of educational returns has important implications for policy-making and micro-level decision making with respect to education. If the variance of educational returns is large, it can leave large sections of the population with negative returns; if the variance of educational returns is gender specific, it can influence households’ decisions to educate girls versus boys. Our econometric results provide evidence that India's labor markets are characterized by significant uncertainty and that the uncertainty is systematically larger for women.

► In developing economies studies of educational returns typically focus on mean values.
► We examine entire distributions of educational returns in India, by education level and gender.
► Women face greater uncertainty than men suggesting that uncertainty in educational returns can foster gender biases in micro-level decisions regarding educating children.