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This paper estimates the distribution of educational returns by gender for India. While previous studies focus on mean returns, the variance of educational returns has important implications for policy-making and micro-level decision making with respect to education. If the variance of educational returns is large, it can leave large sections of the population with negative returns; if the variance of educational returns is gender specific, it can influence households' decisions to educate girls versus boys. Our econometric results provide evidence that India's labor markets are characterized by significant uncertainty and that the uncertainty is systematically larger for women.

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Unlike previous studies on educational returns in developing countries, this paper examines the distributional impacts of education on wages using a recently developed econometric approach - unconditional quantile regressions. The results yield unconditional impacts of education at different points of the wage distribution and, therefore, are more informative from a policy perspective than both traditional regression and quantile regression methods commonly used for estimating educational returns. [The authors] use a nationally representative dataset on labor markets in India, collected in 2005-2006.

The results reveal significant heterogeneity in education's effects along the wage distribution and striking differences in these patterns by gender: the effect of primary education is found to be significantly higher for women than men in the middle of the wage distribution; while the effect of post primary education exhibits a distinct pattern whereby women get significantly higher rewards than men above the median and significantly lower rewards than men below the median. These findings have direct implications for the targeting of education policies that seek to reduce gender wage inequality.

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