Returns to Education

Project Active from to Firms and Entrepreneurship

This report evaluates the returns to education for individuals and households for Uganda using microdata from two recent time periods, 2005/2006 and 2009/2010.

The data sources we used in the analysis of the wage, productivity and profit returns to education come from the Uganda National Household Survey 2005/06 (UNHS) and the Uganda National Panel Survey 2009/10 (UNPS). As with many other studies of wage returns to education, the starting point is the Mincer earnings equation which relates log earnings to an individual's stock of human capital. In this approach, the conventional specification relates log earnings to education levels and to other determinants of earnings capacity.

Based upon this new analysis of data from the 2005/6 Uganda National Household Survey and the 2009/10 Uganda National Panel Survey 2009/10, the findings of this report are:

  1. Higher education levels - measured by years of schooling or by highest level of education - insignificantly raise wages thereby showing a significant average rate of return to education in both years.
  2. There are variations in educational wage differentials around this average rate of return, linked to gender and to urban/rural location.
  3. Agricultural productivity is higher where farm managers have higher education levels, so there is evidence of returns to education for farm production.
  4. Profits of household enterprises are higher where managers have higher education levels, revealing a rate of return to education in the household enterprise sector.
  5. Education levels are linked to patterns of wage inequality and the extent of intergenerational mobility in education in Uganda.

Overall, therefore, the report concludes that educational investments in Uganda deliver a significant return in the wage employment, the agricultural and the household enterprise sectors of the economy.