The Changing Rates of Return to Education in India: A Study of Recent Evidences

In this study, we review the previous pattern of return to education and an attempt is also being made to estimate the recent pattern of return to education in India. The conventional pattern of return to education stated by Psacharopoulos (1993) is tested in Indian context. The purpose of analyzing the changing rates of return to education is manifold. It determines future investment in education by the individual and Govt. It also helps for formulating policies for regular and casual workers in labour market. Both OLS and quantile regression method is used to get both between group and within group inequality in returns to education. Heckman two step procedures are used to get selectivity corrected rates of returns to education. Our findings are contradictory to the diminishing return hypothesis of Psacharopoulos (1993); because the recent pattern shows lower return to primary education compared to other levels in India. On the other hand, in recent period, return to secondary education is higher than higher secondary level. The highest return to diploma is due to increasing demand for skilled workers. The results of our quantile regression analysis shows that irrespective of income groups primary education return is lesser than other levels of education. Besides for regular workers, return to secondary, diploma, graduation and above degree education is more than other levels across the wage quantiles. We found that there is significant variation in return across gender, caste and religious groups. In overall sense, return to education of casual workers is comparatively less than regular workers. Casual workers are getting flat return to education in labour market in India.