Beyond the Mincer Equation: The Internal Rate of Return to Higher Education in Colombia
Documentos de Trabajo; Facultad de Economía, Universidad del Rosario, No. 68
19 Pages Posted: 5 Nov 2009
Date Written: August 13, 2009
In order to present an estimation of the Internal Rate of Return (IRR) to higher education in Colombia we take advantage of the methodological approach provided by Heckman, Lochner and Todd (2005). Trying to overcome the criticism that surrounds interpretations of the education coefficient of Mincer equations as being the rate of return to investments in education we develop a more structured approach of estimation, which controls for selection bias, includes more accurate measures of labor income and the role of education costs and income taxes. Our results implied a lower rate of return than the ones found in the Colombian literature and show that the Internal Rate of Return for higher education in Colombia lies somewhere between 0.074 and 0.128. The results vary according to the year analyzed and individual’s gender. This last result reinforces considerations regarding gender discrimination in the Colombian labor market.
Keywords: education returns, Mincer Equation, internal rate of return, Colombia
JEL Classification: I28, J11, J31
Suggested Citation: Suggested Citation