This paper estimates the returns to education in Greater Buenos Aires from 1986 to 1993. It uses the Mincer wage equation for men aged 25 to 54 who were employed during the survey period. The data are derived from tapes of the Permanent Household Survey, comprising approximately 15,000 individuals and subsamples of around 2,000 men.

Two distinct subperiods can be identified during the period under analysis. The first, characterized by high inflation culminating in the hyperinflation of mid-1989, and the second, beginning in 1990 with inflation stabilization and the start of a structural adjustment process based on the Convertibility Plan, massive privatizations, and the gradual opening of the economy.

The effect of these macroeconomic and structural changes on the returns to different types of investment in human capital is analyzed. For the first subperiod, the results of Pessino (1993) are extended. He found an increase in the rate of return to education, especially at lower levels, an increase in the return to investment in specific human capital, and an increase in the return to self-employment compared to wage earners. These changes are consistent with the hypothesis that education not only serves to increase productivity but also to better cope with inflation in terms of indexed wage contracts. The analysis of the 1986-1990 period confirms the hypothesis that these returns rose with hyperinflation and then returned to their previous levels when inflation moderated. For the second subperiod, where the regime change occurs, the hypothesis is that this change produced advantages for technological change biased towards physical capital-intensive techniques, which fosters an increase in the demand for skilled labor over. that of unskilled labor. Therefore, an increase in the rate of return to education is expected, especially for advanced levels of education, an increase in the rate of return to general investment, and a decrease in the rate of return to investment in specific human capital (due to obsolescence caused by the regime change). Empirical analysis confirms these hypotheses.

Finally, the change in the rate of return to education implies a change in the personal distribution of income. If this rate of return increases, a worsening of the income distribution is expected. This paper shows that hyperinflation produced a worsening that was reversed when stabilization took place in 1990. From 1991-1992 onwards, when increases in the rate of return to education began to be observed again, the income distribution began to worsen once more, but never reaching the levels of 1989. However, the hyperinflationary period did signify a situation of lower well-being, since it implied not only greater variance but also lower average income. In contrast, in the 1992-1993 period, while the variance of income increased, so did the average, making the change in well-being ambiguous.