Return to Education and Endogeneity Bias: A Study Of Higher Education Institutions in Khyber Pakhtunkhwa, Pakistan

Abstract

Human capital is positive and significant determinant of earning. Using data of 653 sample respondents, Traditional and modified Mincerian earning functions were adopted and concluded that rate of return increases with level of education-higher return is associated with highest level of education vice versa. Parental education affects the education level of the respondents and was used as instrument for tackling the problem of endogeneity. The impact of education is stronger (16.44%) for teaching and 6.59% in case of non-teaching. Significant variations in returns were found for overall (15.27%), teaching (24.83%) and non-teaching (17.05%) after considering endogeneity bias using modified Mincerian earning functions.