Earnings, rates of return to education and the earnings distribution in Pakistan

Utilizing data from a survey of 1000 households in Rawalpindi, this study presents estimates of the rate of return to schooling and differences in these rates of return by schooling level and sector of employment. The major finding reported is that the rate of return to schooling in one of Pakistan's major urban areas is low, both in relation to the rate of return on physical capital and in relation to the rates of return to schooling in other developing countries. These low rates of return appear to be a result of a conscious government policy which drastically compressed the skill-wage structure.