Disability and Returns to Education: a Case Study from Nepal *

In this paper, we estimate wage returns to education of individuals with disabilities in Nepal using information on type and age of being impaired as identifying instrumental variables for years of schooling. After controlling for sample selection due to endogenous labor participation as well as endogeneity of schooling decisions and fulltime working status, the estimated rate of returns to education is very high, ranging from 30.4 to 33.2%. The coexistence of these high returns to education and the limited years of schooling suggest that there are credit market imperfections as well as supply side constraints in education for disabled people. Policies to eliminate these barriers will mitigate poverty among persons with disabilities, the largest minority group in the world.