Heterogeneity in the Returns to Education and Experience: Evidence from a High and a Low Income S.E. Asian Country

Abstract

This study investigates the pattern of returns across the earnings distribution by first, contributing new evidence on the pattern of returns to education and experience for one developed and one developing S.E. Asian country (Singapore and the Philippines, respectively); subsequently the existence of a relationship between a country’s development stage and the pattern of returns to education along the earnings distribution is investigated, by putting together the existing international evidence. It was found that quantile returns to an additional year of schooling in the Philippines decrease monotonically, while the opposite is the case for Singapore. This pattern is maintained for both men and women. Looking at the quality rather than quantity of education, we find that in the Philippines the pattern of quantile returns for those with tertiary qualifications are sharply decreasing with quantiles, while it exhibits a more moderate decrease for those with primary and secondary qualifications. In the case of Singapore the pattern of returns for those with primary and tertiary qualifications is increasing with quantiles, while it is relatively flat for those with secondary qualifications. A compilation of the available evidence from 27 case studies suggests that a pattern is emerging, with high income countries associated with increasing returns by quantile and low income countries associated with a decreasing pattern of returns.