The structural transformation and corresponding labor productivity growth is one of the fundamentals of economic development. In the last 20 years the latest structural transformation has occurred in Sub-Saharan African countries. The structural transformation was, however, not always accompanied by overall labor productivity growth even with labor shift from low to high productivity sectors. This study is motivated to provide a microeconomic evidence of the effect of education on within-sector labor productivity in Uganda by jointly estimating returns to education and labor supply. To overcome double censoring problem, the combined model of Double Hurdle and Type III Tobit is constructed and applied for the estimation. Endogeneity of years of education is also tested and controlled by the IVs of primary school fee abolition policy and distance to nearest bank before implementation of the policy in born district. The results suggest an additional 1-year of schooling increases within-sector labor productivity by 0.049, 0.002, 0.128, 0.754 ($/hour) in farming self-employment, farming wage, nonfarm self-employment, nonfarm wage respectively. The joint estimation allows us to decompose the effect into the direct effect on wage, labor supply, labor composition, and the externality effect through own and other household members labor income. Acknowledgement : I thank Dr. Thomas Reardon for providing overall guidance of this study. For the valuable comments, I appreciate Dr. Jeffrey Wooldridge, Dr. Songqing Jin, and Dr. David Tschirley. The data of this study come from Uganda National Panel Survey (UNPS) and Uganda demographic and health survey (UDHS). UNPS was implemented by the Uganda bureau of statistics with financial and technical support from the government of Netherlands and the World Bank living standards measurement study-integrated surveys on agriculture (LSMS-ISA) project. UDHS was conducted by the ministry of finance and economic planning with the funding support from USAID.