The (Perceived) Returns to Education and the Demand for Schooling

Economists emphasize the link between market returns to education and investments in schooling. Though many studies estimate these returns with earnings data, it is the perceived returns that affect schooling decisions, and these perceptions may be inaccurate. Using survey data for eighth-grade boys in the Dominican Republic, we find that the perceived returns to secondary school are extremely low, despite high measured returns. Students at randomly selected schools given information on the higher measured returns completed on average 0.20–0.35 more years of school over the next four years than those who were not.