We show that the lack of significance of schooling in growth regressions is due to: 1) a problem of a proper definition of the way in which years of schooling should enter in a production function.; 2) collinearity between physical and human capital stocks; and 3) failure to cope with measurement error and endogeneity produces biased estimates. After dealing with these problems, the social return of schooling is positive and significant. However no Lucas-type externalities are observed.

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We follow Hallerstein et al. (1999) framework, to estimate marginal productivity differentials and compare them to estimated relative wages in order to provide evidence on productivity and non-productivity-based explanations of the determinations of wages. The results show that more educated workers are more productive and earn higher wages. Workers that have received in-firm training are also found to be more productive, earning higher wages than those without any form of training.

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We estimate the rate of return to primary, secondary and university education for cohorts born from 1945 to 1975. Estimated returns start at a common level of 20% and then diverge, to finally converge at 30%. Regarding income distribution, we observe a dramatic improvement at the margin, especially after the cohort born in 1963 and again after the cohort born in 1973. About half of the working population was born before 1963. Hence this improvement at the margin is not seen in the stock.

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Within the attempts to understand Mexican economic inequality, returns to education have received a great deal of attention. The driving question has been: why are Mexican wages so unequal? This paper argues that not only the distribution of human capital matters, but also sociodemographic variables, which have their own dynamics and intricate interactions with the former. The resulting is a complex story, where income profiles depend upon particular characteristics.

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The paper provides a flexible framework to deal with educational provision and public policies in developing countries, linking the impact of quality-quantity-equity of educational policies on labour markets and the external sector. The potential of education and educational policies to produce allocative, growth and distributive effects is shown in the simulation exercises.

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We study the factors behind the increase in the relative demand for skilled workers in Peru. We use a translog cost function for gross output to incorporate the effects of materials, both domestic and imported, and capital. We find that capital accumulation has a strong positive effect on the relative share of skilled workers indicating capital-skill complementarity. There is some evidence that imported materials decrease the relative demand for skilled labor.

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