Education gender gaps in Pakistan: is the labour market to blame

Differential labor 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 article contributes to the literature by using a variety of methodologies (ordinary least squares, Heckman correction, two‐stage least squares, and household fixed effects) in order to estimate economic returns to education. The latest nationally representative data - the Pakistan Integrated Household Survey (2002) - are used. Earnings function estimates consistently reveal a sizable gender asymmetry in economic returns to education, with returns to women's education being substantially and statistically significantly higher than men's. The return to an additional year of schooling ranges between 7% and 11% for men and between 13% and 18% for women. There are also large, direct returns to women's education at low levels of schooling, and the education‐earnings profile is more convex for women than for men. However, a decomposition of the gender wage gap (into the component "explained" by differing male and female endowments and the residual component) suggests that there is highly differentiated treatment by employers. We conclude that the total labor 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