Sep 11, 2012

Economic Freedom and Returns to Human Capital

Using estimated returns to schooling and experience from 122 household surveys from 86 developing countries, we demonstrate a strong positive correlation between economic freedom and returns to human capital. The positive effect is observed at all quantiles of the wage distribution. Economic freedom benefits the most skilled who get higher returns to schooling; but it also benefits the least skilled who get higher returns from experience.
Source: King, Montenegro, Peter F. Orazem (Economic Development and Cultural Change, October 2012). A draft is here. The name of the paper is "Economic Freedom, Human Rights, and the Returns to Human Capital: An Evaluation of the Schultz Hypothesis."

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