# **Previous studies**

Though estimates of the returns are relatively recent undertakings in economics, estimates for Turkey were among the first to be published. Annex Table A-1 shows a plethora of previous rate of return estimates for Turkey, as early as 1968. Note that the early estimates were based on the discounting method, as this was the only available method based on the work of Becker (1964). Following the publication of Mincer (1974), earnings function estimates dominate, and social returns tend to disappear. Some studies have used both methodologies on the same data set, producing divergent estimates, such as Kara (2008).

Overall, previous estimates show increasing returns for men (Salehi et al. 2009; Tansel and Bodur 2012) and higher returns for women (Vural and Gulcan 2008). Using the same methodology over time, Montenegro and Patrinos (2014) show a slightly declining return overall from 10.8 percent in 2002 to 9.3 percent in 2010. The returns to primary and secondary education have been low for some time.

While Ozelli (1970) estimated a low 2.5 percent rate of return to higher education using the full discounting method for 1960, Krueger (1972) on the other hand, estimated the returns to higher education in 1968 at 26.0 percent using the full discounting method. In 1994, the full discounting returns to higher education are estimated at 13.2 percent by Kara (2008). By 2015, the OECD (2018) estimates the full discounting returns to higher education for men at 31.0 percent.

The Mincerian returns to higher education for men are estimated at 13.0 percent in1987 (Tansel 1994) to 19.0 percent in 1994 (Tansel 2005). Overall, they range from 10.8 percent in 1994 (Kara 2008) to 13.1 percent in 2002 (Tansel and Bodur 2012), to 16.0 percent for the period 2009-14 (Karatas 2018). Using the same methodology over time, Montenegro and Patrinos (2014) show a consistently large private return to higher education of about 18 percent from 2002 to 2010, slightly higher for females. Di Paolo and Tansel (2017) analyze wage differentials by college major.

# **Data**

We are using data from Turkey’s 2017 Household Labor Force Survey (HLFS), covering nearly 400,000 individuals aged 15 and over. The HLFS is a nationally representative survey of individuals. We use wage and other information for individuals aged 15 and over in full time dependent employment. We estimated the number of years of schooling of the individual based on the highest educational level completed and taking into account the changes in the required years of schooling for a degree over time. We define a policy dummy variable equal to one for those who were affected by the 1987 educational reform that increased compulsory schooling from five to eight years. This policy dummy is used as an instrument for schooling. Table 1 gives summary statistics.

For the working population, the average years of schooling is 7.5. Only 11 percent of the sample has no education, most have primary or secondary, and 16 percent have higher education. For those with secondary schooling only, the majority, at 80 percent, attended a vocational school. For the working wage earners who report positive labor market earnings, the average years of schooling is 10.1 and more than three-quarters are employed in the private sector.

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