Education, Earnings and Returns to Schooling in Tunisia

This paper aims at identifying the main determinants of earnings, estimating the private returns to education and highlighting the main sources of heterogeneity in these returns in Tunisia. The estimation results show that education is an important determinant of private earnings. However, the private rate of return to schooling is relatively low by international standards, especially for basic education. It is argued that in addition to the limited capacity of the economy to create high-productivity jobs, institutional factors such as the low quality of education, rigid tracking system after secondary education, inadequacy of the available skills for the need of the private sector and nepotism may explain the low and heterogeneous returns to education in Tunisia. The returns to schooling are found to increase by level of education showing a systematic bias toward higher levels of education at the expense of basic education, due to credentialism and focus on certification. We find evidence of heterogeneity of returns to higher education across varying regions and socioeconomic backgrounds, which undermines the role of education as a social elevator. Regional disparities by place of residence, both in earnings and returns to higher education, may be explained by the lack of economic opportunities and low exposure to market forces in many inland regions, which is reminiscent of an unbalanced regional development. These disparities may also be attributed to information failure as good employment opportunities are less visible to jobseekers in rural and inland areas. We also argue that rural-urban disparity in returns to higher education by place of birth may be explained by differentiated early-life conditions in terms of socio-economic and family backgrounds as well as inequality of opportunity in access to quality education. Moreover, educational wage differentials are found to be significant between the formal private sector and the informal sector, between the public and private sectors and across occupational categories. These results are used to suggest directions to strengthen the role of public policies in reducing inequality of opportunities in both schooling and earnings.