Note on measuring educational returns in LDCS

ESTIMATES OF RETURNS TO EDUCATION IN DEVELOPING COUNTRIES APPEAR TO BE OPTIMISTICALLY HIGH WHEN HIGH FAILURE RATES AND EDUCATIONAL SCREENING ARE NOT TAKEN INTO ACCOUNT. WHEN THE STANDARD INTERNAL RATE OF RETURN (IRR) METHODOLOGY IS MODIFIED TO INCORPORATE THESE POSSIBILITIES, ESTIMATED RETURNS FALL AS MUCH AS 50% WHEN APPLIED TO THE IVORY COAST. THE RESULTS SUGGEST THAT (1) THE MODIFIED METHODOLOGY SHOULD BE APPLIED IN OTHER PARTS OF THE WORLD WITH SIMILAR EDUCATIONAL AND LABOR MARKET CHARACTERISTICS AND (2) ESTIMATES NOT ACCOUNTING FOR THESE FACTORS MOST LIKELY EXAGGERATE TRUE EDUCATIONAL RETURNS.