How much do education, experience, and social networks impact earnings in India? A panel data analysis disaggregated by class, gender, caste and religion

Abstract

We estimate the returns (measured by hourly earnings) to education, experience, and social networking in India using individual-level panel data from the India Human Development Surveys. We combined the two latest waves of this survey using individual-level identifiers to generate a balanced panel and merged it with various household characteristics. We provide estimates of private returns for an additional year of education and experience by consumption quintiles, gender, caste, and religion in a fixed-effects Heckman model that controls for selection bias. This methodology improves upon estimates of all earlier studies on earnings in India, as most of the literature has relied on cross-section data or pseudo-panel data. We also examine the impact of social networking on earnings, which is under-explored in nationwide studies in India. We find that education significantly and positively affects earnings for all consumption quintiles, gender, caste (except schedule castes), and religious groups. Among economic groups, the highest returns are observed for the third quintile above the poverty line. Returns to females for an additional year of education are nearly double that of males but the difference in starting earnings keeps earnings of males higher for long periods. Among the castes, scheduled castes have the highest returns to education and other minorities among religious groups. Social networking positively impacts males, Hindus, and the quintile just above the poverty line. Experience positively impacts women's earnings, general caste and scheduled caste, Hindus and Other minorities and two consumption quintiles (two and five) above the poverty line.