Private Rate of Return to Education of Male & Female Household Heads in Isfahan, Iran.

The private internal rate of return (IRR) for education levels of the household heads in the city of Isfahan in 1992 is estimated. The subjects for this study are a sample of household heads from cross-sectional data. An earnings regression equation along with discounting techniques is employed. The results show that the IRR is high (around 10 percent) for the two extremes of primary school and the doctoral level graduates. Rates are fairly low (6.7 percent) for those with bachelors degrees, and very low (less than 2 percent) for high school graduates. The very low IRR for high school graduates in Isfahan matches the very high unemployment rate for these graduates at the country level (27.1 percent in 1991 and 33.4 percent in 1994). These existing circumstances call for policy decisions to improve the labor market outcomes for educated people. Due to the characteristics of the sample used in the analysis, which was based on cross-sectional data and truncated to household heads, one should be careful in reaching policy conclusions simply on the basis of the results of this study.