Return to Education in Pakistan: A Brief Overview

Muhammad Jehangir Khan
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Muhammad Jehangir Khan: Pakistan Institute of Development Economics

No 2025:4, PIDE-Working Papers from Pakistan Institute of Development Economics

Abstract: The rate of return to education is a measure of the economic benefits of education in terms of increased earnings and productivity. To provide evidence on the rate of return for Pakistan, we conducted an extensive literature search using online sources such as Google Scholar, JSOR, and others. We also presented global evidence, for comparison on the rate of returns covered extensively in the literature surveys of Montenegro and Patrinos (2023) Patrinos and Psacharopoulos (2020). There are two main estimation frameworks to estimate the rate of returns; the earning function and the full discounting method. The survey of earning differentials in Pakistan reveals several key insights. The rate of return to education varies, but overall, investing in education yields higher returns for females compared to males. However, the average returns for males are relatively low in Pakistan compared to global averages. Across economies, the returns are generally higher for females, and high-income economies exhibit the smallest gender gap. While private returns in Pakistan exceed social returns at higher education levels, a significant proportion of children end up with only primary education, leading to lower productivity and hindering long-term economic growth.

Pages: 21
Date: 2025
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