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Economic Freedom, Human Rights, and the Returns to Human Capital: An Evaluation of the Schultz Hypothesis

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  • King, Elizabeth M.
  • Montenegro, Claudio E.
  • Orazem, Peter F.
Abstract
Hundreds of studies measure the private returns to schooling, most focusing on a single country or a subset of countries. Following Mincer (1974), inference on returns to schooling and work experience are derived from the regression coefficients of log earnings on years of schooling and quadratic terms in age. Due mainly to George Psacharopolous and his colleagues (Psacharopoulos 1973, 1994; Psacharopoulos and Patrinos 2004), we have compilations of estimated returns to schooling across many countries. These estimates show remarkable consistencies. Despite differences in estimation methods, specifications, and level of economic development, virtually all studies show that earnings rise with years of schooling and increase at a declining rate in age or work experience.1 In almost all data sets, the largest percentage annual wage gains are captured by the youngest workers. The wage gain from additional experience gets smaller and may even turn negative with age.

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  • King, Elizabeth M. & Montenegro, Claudio E. & Orazem, Peter F., 2012. "Economic Freedom, Human Rights, and the Returns to Human Capital: An Evaluation of the Schultz Hypothesis," ISU General Staff Papers 201210010700001269, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201210010700001269
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    1. Economic Freedom and Returns to Human Capital
      by UDADISI in UDADISI on 2012-09-11 17:52:00

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    Cited by:

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    3. Montenegro, Claudio E. & Patrinos, Harry Anthony, 2014. "Comparable estimates of returns to schooling around the world," Policy Research Working Paper Series 7020, The World Bank.
    4. Mohammad Mainul Hoque & Elizabeth M. King & Claudio E. Montenegro & Peter F. Orazem, 2019. "Revisiting the relationship between longevity and lifetime education: global evidence from 919 surveys," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(2), pages 551-589, April.
    5. Zafiris Tzannatos & Ishac Diwan & Joanna Abdel Ahad, 2016. "Rates of Return to Education in Twenty Two Arab Countries: an Update and Comparison Between MENA and the Rest of the World," Working Papers 1007, Economic Research Forum, revised May 2016.
    6. Elizabeth M. King & Claudio E. Montenegro & Peter F. Orazem, 2012. "Economic Freedom, Human Rights, and the Returns to Human Capital: An Evaluation of the Schultz Hypothesis," Economic Development and Cultural Change, University of Chicago Press, vol. 61(1), pages 39-72.
    7. Johan Graafland, 2020. "When Does Economic Freedom Promote Well Being? On the Moderating Role of Long-Term Orientation," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 149(1), pages 127-153, May.
    8. Heather Congdon Fors, 2017. "Globalization and school enrollment in a panel of countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(3), pages 295-315, April.
    9. Susan Godlonton, 2020. "Employment Exposure: Employment and Wage Effects in Urban Malawi," Economic Development and Cultural Change, University of Chicago Press, vol. 68(2), pages 471-506.
    10. Marek Loužek, 2022. "Přínos Theodora Schultze k rozvoji ekonomické teorie [Theodore Schultz's Contributions to Economic Theory]," Politická ekonomie, Prague University of Economics and Business, vol. 2022(6), pages 730-748.
    11. Lant Pritchett, Justin Sandefur, 2013. "Context Matters for Size: Why External Validity Claims and Development Practice Don't Mix-Working Paper 336," Working Papers 336, Center for Global Development.
    12. Laporšek, Suzana & Orazem, Peter F. & Vodopivec, Milan & Vodopivec, Matija, 2021. "Winners and losers after 25 years of transition: Decreasing wage inequality in Slovenia," Economic Systems, Elsevier, vol. 45(2).
    13. Johan Graafland & Harmen Verbruggen, 2022. "Free-Market, Perfect Market and Welfare State Perspectives on “Good” Markets: an Empirical Test," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 17(2), pages 1113-1136, April.
    14. Imed Limam & Abdelwahab Ben Hafaiedh, 2017. "Education, Earnings and Returns to Schooling in Tunisia," Working Papers 1162, Economic Research Forum, revised 12 Jun 2017.
    15. Horst Feldmann, 2021. "Economic Freedom and People’s Regard for Education," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 154(1), pages 235-256, February.
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    18. Olalekan C. Okunlola & Olumide A. Ayetigbo, 2022. "Economic Freedom and Human Development in ECOWAS: Does Political-Institutional Strength Play a Role?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 1751-1785, September.

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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General

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