Using variation in schooling availability to estimate educational returns for Honduras

This paper presents IV estimates of the returns to schooling for Honduran males by exploiting the variation in the availability of schooling at the time individuals were eligible to commence their education. The IV estimates are significantly higher than OLS estimates. The higher rate of return estimates are driven by the greater schooling attainment and the higher marginal returns for individuals from more privileged family backgrounds. In line with studies for developed countries, we conclude that, when estimating rates of return to education for developing countries, it is important to account for the endogeneity of educational attainment. [JEL J31, J24, O15] (C) 1998 Elsevier Science Ltd. All rights reserved.