The objective of this study is to review what is known about the role of education in improving labor market outcomes, with a particular focus on policy considerations for developing countries. The report presents findings from current literature on the topic, which offer new ways of looking at the returns to education, together with evidence from four original data analysis and background studies of education and labor issues in Ghana and Pakistan. Country studies on Ghana and Pakistan are used to substantiate findings of the literature and illustrate the heterogeneity of education–labor market linkages across regions. These countries were chosen because they are representative of two of the poorest regions of the world and because their inclusion in the analysis complements ongoing World Bank work on education and labor market issues in those countries. The report argues that educational policies need to be seen within a broader macroeconomic context if education is to contribute to national economic growth.