What factors drive individual misperceptions of the returns to schooling in Tanzania? Some lessons for education policy

Plamen Nikolov and Nusrat Jimi ()

Applied Economics, 2018, vol. 50, issue 44, 4705-4723

Abstract: Evidence on educational returns and the factors that determine the demand for schooling in developing countries is extremely scarce. Building on previous studies that show individuals underestimating the returns to schooling, we use two surveys from Tanzania to estimate both the actual and perceived schooling returns and subsequently examine what factors drive individual misperceptions regarding actual returns. Using OLS and instrumental variable methods, we find that each additional year of schooling in Tanzania increases earnings, on average, by 9 to 11%. We find that on average individuals underestimate returns to schooling by 74 to 79% and three factors are associated with these misperceptions: income, asset, poverty and educational attainment. Shedding light on what factors relate to individual beliefs about educational returns can inform policy on how to structure effective interventions in order to correct individual misperceptions.

Date: 2018
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Working Paper: What Factors Drive Individual Misperceptions of the Returns to Schooling in Tanzania? Some Lessons for Education Policy (2020)
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DOI: 10.1080/00036846.2018.1466991

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