THE RELEVANCE OF STANDARD ESTIMATES OF RATES OF RETURN TO SCHOOLING FOR EDUCATION POLICY - A CRITICAL-ASSESSMENT

This paper examines the accuracy and usefulness of estimated rates of return to schooling based on the standard human capital model of Becke r and Mincer. Regarding accuracy, it investigates whether failure to a ccount for differences in ability and school quality lead to significa nt biases. Estimates using Ghanaian data confirm this possibility. Eve n when accurate, estimated rates of return to additional years of scho oling may have limited policy implications; more useful for government s are rates of return to investments in school quality. The paper uses data on cognitive skills to estimate rates of return to three types o f school quality improvements.