Is the Rate of Return to Primary Education Higher than the Rate of Return to Higher Education? A Study on the Buenos Aires Metropolitan Area, 1980 and 1995

From the mid-1980s to the present, the World Bank has conducted several country studies to test one standard model about the behavior of the rates of return to different levels of education. That standard model predicts, first, that the rates of return are higher for primary education than for higher education and, second, that the returns are stable or decline over time. Yet, there is little evidence on the changes of the return to schooling over time, mainly because rates of return are estimated for a single point in time.
This study uses household survey data for two years (1980 and 1995) for the Buenos Aires Metropolitan Area to examine at what level of education the returns are highest, and how they change over time. Results from the Mincer regression equation and the internal rate of return formula indicate that investing in higher education yields greater returns than investing in secondary or primary education. When examined over time, rates of return vary depending on the level of education and sex. Findings are consistent with Carnoy’s argument that, among countries, there is a changing pattern of time-series estimates of rates of return, which depends on the stage of economic development and educational expansion.