Education returns across quantiles of the wage function: alternative explanations for returns to education by race in South America.

Abstract

Private wage returns to schooling in South Africa in 1993 are twice as high for nonwhites as for whites and substantially higher at advanced levels of schooling for both races. To explore how these returns might be expected to change as the proportion of Africans with secondary and higher education increases quantile regressions for the wage function are estimated for African males and white males. If the residuals based on a standard wage function specification are interpreted as omitted ability and it is assumed that ability increases (decreases) returns to schooling then we expect quantile returns to increase (decrease) at higher quantiles. This is not observed for Africans at the higher and secondary school level but is evident among whites at higher educational levels. The opposite pattern of differential returns favoring the least able (i.e. lowest deciles) is reported for the lower tail of the educational distribution that is for Africans at the level of primary school and for whites at secondary school. (authors)

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