This paper develops a comprehensive framework of the main hypothesis tested
whether the private returns to investment in education in Albania are sufficient to
provide economic incentives for a high participation rate in post-compulsory
schooling. We use cross section data from the Living Standards Measurement
Survey (LSMS) of 2002 and develop a comprehensive framework for our
quantitative analysis of the private returns to schooling and private incentives to
invest in education. We construct estimates of the private return to each postcompulsory
schooling level, taking into account the effects of education on wages.
Evidence from the data shows that the significant part of return to secondary
education is linked to further returns to higher education. This finding might
explain the reduced incentives to invest in additional human capital.
Key words: rate of return, Mincer equation, returns to education.