Are Returns to Education on the Decline in Venezuela and Does Mission Sucre Have a Role to Play?

50 Pages Posted: 21 Jun 2009

See all articles by Naihobe Gonzales

Naihobe Gonzales

Georgia Institute of Technology

Ruth Uwaifo Oyelere

Morehouse College; IZA Institute of Labor Economics

Abstract

There is anecdotal evidence that the standard of living for the educated has fallen in Venezuela over the last few years. This evidence comes as a surprise because after experiencing an economic downturn in 2002 and 2003, Venezuela's economy has boomed (gross domestic product growth has hovered between 8 and 18%) in large part due to the increase in the price of petroleum. In this paper, we provide evidence that returns to education have decreased significantly in Venezuela from 2002 to 2008. More importantly, we focus on what has led to the decrease in returns. We explore a fall in quality and a supply-demand argument for this decline. Mission Sucre was enacted in September 2003 by President Hugo Chavez to provide free mass tertiary education, in particular targeting the poor and marginalized. The implementation of this program created a sudden increase in the supply of skilled labor and had a direct impact on quality of education. Although we do not claim that 100% of the decline between 2002 and 2008 can be linked to this program, we provide ample evidence that a good part of the falling returns can be linked to Mission Sucre. Specifically, we show that for a 1% increase in the share of Mission Sucre students in the state, returns to university level of education declined by about 5.6 percentage points between 2007 and 2008.

Keywords: human capital, Venezuela, policy reform, returns to education, schooling

JEL Classification: J2, J24, J38, I21, O12, O15

Suggested Citation

Gonzales, Naihobe and Uwaifo Oyelere, Ruth, Are Returns to Education on the Decline in Venezuela and Does Mission Sucre Have a Role to Play?. IZA Discussion Paper No. 4206, Available at SSRN: https://ssrn.com/abstract=1423322 or http://dx.doi.org/10.2139/ssrn.1423322

Naihobe Gonzales (Contact Author)

Georgia Institute of Technology ( email )

Atlanta, GA 30332
United States

Ruth Uwaifo Oyelere

Morehouse College ( email )

Department of Economics
Atlanta, GA 30332
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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