The Private Rates Of Return To Education In Pakistan
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Date
2010-05
Authors
Mohammad, Farooq
Journal Title
Journal ISSN
Volume Title
Publisher
Universiti Sains Malaysia
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.
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Keywords
The private rates of return , to education in pakistan