Returns to Human Capital in Pakistan: A Gender Disaggregated Analysis

The impact of human capital variables on the earnings of regular wage employees is explored in this paper. Besides education and experience, literacy index, technical training, and school quality are included in the earning functions estimated for individuals. The credentialist view that education does not improve productivity—that it rather provides positive signals about productivity—is also tested. The results are based on the Pakistan Integrated Household Survey 1995-96 data, which provides information on many aspects of the individual’s characteristics missing in other surveys. The results of the study provide ample evidence in favour of human capital as a productivity-enhancing device for both male and female workers. All human capital variables are found to be statistically significant, having positive magnitude. The diploma effect is not very important for Pakistani workers, as only a few diploma dummies are statistically significant.