Why Are There Returns to Schooling?

A framework for investigating the circumstances under which schooling improves productivity in the market and in the household, based on the notion that schooling enhances information acquisition, is presented. Empirical findings that shed light on when and where schooling is productive and on the relationship between schooling and learning is discussed. New evidence is presented that suggests that schooling improves abilities to learn. The evidence thus suggests that schooling investments are not a universal panacea; reaping returns from such investments requires that the scope for productive learning be expanded via either technical innovation or changes in market and political regimes.