sanitation, and irrigation. Evaluations find that decentralized decision-making does alter the allocation of resources (Alderman (2001); Faguet (2004); Galasso and Ravallion (2005)). However it is less clear that the resources are allocated in ways that improve desired outcomes. There are numerous reasons why local control may yield poor outcomes. Bardhan (2002) and Bardhan (2005) argue that decentralized decisions are particularly prone to fail in developing countries where local officials may be subjected to undue influence by prominent local families, there may be no tradition of monitoring of local officials by local residents, and local officials may lack the necessary experience or skills to manage resources effectively.

We utilize the Freedom House Imputed Polity measure which rates countries by their democratic institutions. The scale varies from 0 to 10 with 0 being least democratic and 10 being most democratic. One concern is that we will have trouble distinguishing the effects of democratic institutions from those of economic and individual freedoms. In fact, democracies are more likely to have more economic freedoms (ρ = 0.45) and are more likely to protect individual political rights (ρ = 0.74). Nevertheless, there are countries that provide exceptions. Democratic countries with below average protection of individual rights include Indonesia, Kenya, and Turkey. Sierra Leone, Gambia and Haiti are examples of relatively nondemocratic countries that offer above average levels of individual rights. Bahrain and the United Arab Emirates score low on democracy and individual rights, but offer high levels of economic freedom. The Ukraine offers high levels of democracy and individual rights, but below average economic freedoms. The variation across these countries should be sufficient to enable us to identify the independent effects of democratic institutions from those of economic freedom or individual rights.

# **_E. Equal Rights_**

Returns to education may also depend on how equally the opportunities or personal freedoms are distributed among demographic groups. Countries may have policies that provide economic or political freedoms generally to the populace and yet deny those freedoms to ethnic, racial or religious minority groups or to women. Unequal access to economic mobility would certainly lower returns to schooling for members of the disadvantaged group, as has been shown in many studies of the effect of discrimination on labor market earnings. The unequal access could even limit returns to schooling for members of the majority to the extent that the limitations on economic freedom lower the efficiency of resource allocation in the economy as a whole. The magnitude of this inefficiency due to the misallocation of resources increases with the size of the group that faces discriminatory access. Clark (2007) points to England’s broad distribution of human capital and its relatively egalitarian society as why it, and not the more unequal China, India or Japan, was first to foster an Industrial Revolution.

Our measure of equal rights protection and access to economic opportunity focuses on the rights of women. Representing half the population, if women face restricted economic mobility, they are a sufficiently large group to alter average returns to schooling for the country as a whole. In addition, unlike ethnic or racial groups, measures of economic or political power that focus on women can be easily compared across countries. We use the percentage of women in the national legislature as our indication of equal access. Since 1997, the Inter-Parliamentary Union provides a continuous measure of the percentage of seats in the lower house parliament held by women for 188 countries. Melander (2005) has a slightly different measure that includes 9