Are returns to education on the decline in Venezuela and does Mission Sucre have a role to play?

Anecdotal evidence points to a falling standard of living for the educated in Venezuela. During this same period, President Hugo Chávez implemented several education reforms. We focus on a major university education reform known as Mission Sucre and its potential impact on returns to university education. First, we show that returns to education decreased significantly in Venezuela from 2002 to 2008. Subsequently, we explore the impact of the program on non-program participants and provide evidence that a substantial part of the falling returns at the tertiary level can be linked to Mission Sucre. Our results suggest that the reform created a negative externality on students who did not participate in the program, leading to a 2.7 percentage point decline in returns to university education for non-Mission Sucre students in the 23–28 age cohort.

► First, we answer whether returns to education decreased in Venezuela after 2002. ► We find that the average returns to education declined by 3.1 percentage points and pay off university education fell by over 10 percentage point over 2002–2008. ► Motivated by these findings, we evaluate the possible role of Mission Sucre on the significant decline in returns to university education. ► Using a difference in difference strategy, we find that Mission Sucre led to a 2.7 percentage point decrease in returns to university education among the 23–28 age cohort.