Education, Skills and Labor Market Outcomes: Evidence from

This paper investigates the education-earnings relationship in Pakistan, drawing on the Pakistan Integrated Household Surveys 1998/99 and 2001/02. The analysis has three main goals: to examine the labor market returns to education amongst wage-employed, self-employed and agricultural workers; to examine the labor market returns to literacy and numeracy skills for these categories of workers; and to analyze the pattern of returns to education along the earnings distribution. We also investigate the shape of the education-earnings relationship. The analysis is done separately by gender and age group, and attempts to address the usual biases when estimating returns to education. Finally, we investigate how key results have changed between 1998/99 and 2001/02. * This is a background paper for an upcoming World Bank study on education labor market linkages. We are indebted to workshop participants at the World Bank, in particular Tazeen Fasih and Alonso Sánchez, and to Francis Teal, for useful comments on an earlier draft of the paper. We thank Alonso Sánchez for excellent research assistance