This study has used micro data to analyse the effect of human capital
externality on earnings and returns to education. The parameters of the
earnings function are estimated using the ordinary least squares method.
The results show that human capital has a positive effect on earnings,
indicating that a general increase in the level of education benefits all
workers. The general increase in female education benefits both men and
women, but men benefit more from it than do women. Private returns to
education generally increase with the level of education. Taking into account
human capital externality reduces returns to primary education but
increases returns to university education. However, the effect of human
capital externalities on private returns to secondary education is negligible.