Institute for Social and Economic Change
Working Paper: 358
The Changing Rates of Return to Education in India:
Evidence from NSS Data
This paper estimates rates of return to education in India by gender, caste, religion and age cohorts using data for the period 1983 to 2011-12. We estimate standard Mincerian wage equations separately for regular and casual workers. To account for the possibility of sample selection bias in Multinomial logit, Lee Procedure is used. The findings of the study show that the overall rates of return to education for regular workers are the highest for diploma, followed by graduation and above degree, secondary education; the returns to higher secondary, graduation and above degree are rising, but primary education is falling over the years; rates of return to education are increasing across the age cohorts. For casual workers, overall returns to primary and middle education are positive; while returns to secondary and higher secondary education are negative. Using quantile regression method, we found that the effect of education is not the same across the wage distribution. Returns differ considerably within education groups across different quantiles of the wage distribution. For regular workers, overall returns to secondary education is rising across the quantiles; while returns to higher secondary, diploma, graduation and above degree follow an inverted U-shape pattern. For casual workers, overall returns to primary and middle education are rising across the quantiles.