The private rates of return to education in Pakistan

dc.contributor.author	Farooq, Mohammad
dc.date.accessioned	2015-05-26T06:32:47Z
dc.date.available	2015-05-26T06:32:47Z
dc.date.issued	2010
dc.description.abstract	The development of human capital especially through education and schooling is regarded as the main factor promoting the over all development of nations. The human factor is generally believed to be both an input in the production process as well as the beneficiary of production. It is theoretically and empirically proven that certain level of education and schooling is crucial for the development and progress of any nation or country. Therefore, this study has attempted to see the impact of various levels of education on earnings of the labor force in Pakistan using the 2004- 05 survey data to reaffirm the importance of human capital theory. This study used the Mincerian Model (1974) to study the impacts of education on the monthly earnings of the labor force. The other explanatory variables included were: work experience, different categories of occupations, various industrial groups, organizations or institutions where the worker is employed, provinces, and regions (rural/urban). The recent Pakistan Social and Living Standard Measurement (PSLM) Survey 2004- 05 provided the necessary data, which was used for this research. The results obtained using the Mincerian method shows that both schooling and experience have a positive influence on monthly earnings of the labor force. The coefficient of schooling indicate that an additional year of schooling raises the earnings of a worker by 5.54 percent, while the coefficient of experience shows an increase of 8.11 percent by an additional year of experience in labor market. Separate estimations were made for male and female labor force using the fully extended Mincerian model (equation 4.5). The results showed that primary schooling raises the earnings of the male worker by 3.04 percent while that of female worker by 2.12 percent. The returns for middle education level, matric, intermediate education level, bachelor, masters, M.Phil and doctoral are: 2.63, 7.40, 6.0, 10.30, 9.40, 4.10 and 2.73 percent respectively for male workers. A similar pattern was observed for female workers. However, the rates of return were higher than males especially for intermediate education level, bachelor, and masters. The degree in medicine (MBBS) raises the monthly income of females by 28.20 percent as compared to 8.30 percent for the male workers showing a greater prospect for females to join this profession. Generally, workers working in the urban areas earn more than workers in rural areas, according to the study. The estimated returns to education in this study for Pakistan are lower when compared with other countries. Contrary to the world-wide pattern of the rates of return to education studies where returns are higher for primary education, returns to primary and middle standard education in Pakistan are the lowest. The study also decomposed the earnings differentials between male and female labor force using the Oaxaca (1973) methodology. Using the male regression results for discrimination, the average male in Pakistan earns 172 percent of the average female's monthly earnings. On the other hand, using female regression results, a male worker with the same characteristics as the female would earn 123 percent of female's earnings, or female worker would earn Rs.82 compared to Rs.lOO earned by male worker. This probably indicates discrimination against female workers in the Pakistani labor market. There is probably a need to review the employment policy of both the public and private sectors to reduce this gender discrimination. Inequality in the distribution of earnings was also calculated using the Ginicoefficient. The results indicate that inequality is higher in males (0.513) as compared to females (0.454) in Pakistan. The Gini coefficient for rural areas is 0.317 while for urban areas it is 0.362. Due to an inverse relationship between ,education and earnings inequality, the situation in Pakistan has improved. To improve the situation further, more emphasis should be given to schooling of females in Pakistan.	en_US
dc.identifier.uri	http://hdl.handle.net/123456789/740
dc.language.iso	en	en_US
dc.subject	Education in Pakistan	en_US
dc.title	The private rates of return to education in Pakistan	en_US
dc.type	Thesis	en_US