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Rate of Return to Education in India: Some Insights

Publication date

Jun, 2019


NIPFP Working Paper No. 270


Satadru Sikdar


There is a general tendency in the literature to consider and analyse investment decisions on education, based upon the pecuniary rate of return, without focusing the ‘intrinsic’ advantages of education. Without engaging in the inadequacy of such an approach, this paper presents the relationships between wage and education levels among employed persons from different socio-religious and occupational groups. Based on an analysis of the NSS 68th round data, the results show that in India, there are insignificant relationships between wages and education level, in most cases. However, persons with higher education level are able to get regular salaried jobs. In fact, even for those who are part of the socio-economically deprived sections, higher educational attainments facilitate better jobs. Diversification and exclusion problems are common features of job markets in India, as reflected in different indicators. Further, the paper also finds that wage differences in ‘formal’ and ‘informal’ sectors, ‘skill mismatch’ and volatilities in job markets play important roles in job opportunities and returns to labour. 
JEL Classification Codes: I26, J24, J01
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