© 2007 Research Consortium on Educational Outcomes and Poverty WP07/01 RECOUP Working Paper No 1 Rates of Return to Education by Gender in Pakistan

Differential labour market returns to male and female education are one potential explanation for large gender gaps in education in Pakistan. We empirically test this explanation by estimating private returns to education separately for male and female wage earners. This paper contributes to the literature by using a variety of methodologies (Ordinary Least Squares, Heckman correction, 2SLS and household fixed effects) in order to consistently estimate economic returns to education. Earnings function estimates reveal a sizeable gender asymmetry in economic returns to education, with returns to women’s education being substantially and statistically significantly higher than men’s. However, a decomposition of the gender wage gap suggests that there is highly differentiated treatment by employers. We conclude that the total labour market returns are much higher for men, despite returns to education being higher for women. This suggests that parents may have an investment motive in allocating more resources to boys than to girls within households