Schooling, Informal Experience, and Formal Sector Earnings: A Study of Indian Workers

This paper estimates an earnings function for male workers belonging to the Indian corporate sector. The model allows for differential rates of return to schooling and distinguishes tenure from total labor market experience. The rate of return to schooling is found to be low up to the junior level, increases significantly at the secondary and undergraduate levels, but sharply declines at the masters level. Seniority and firm-specific factors are found to be important determinants of earnings. When years of unemployment and informal experience are incorporated, earnings of low-education workers appear to be driven entirely by formal-sector experience.