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Demand for Skills, Supply of Skills and Returns to Schooling in Cambodia

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  • Chris SAKELLARIOU

    (Division of Economics, Nanyang Technological University, Singapore)

Abstract

In this paper I take a detailed look into the returns to schooling in Cambodia using the 1997 and 2003-04 Socioeconomic Surveys of Households and alternative estimation techniques (OLS vs. Family Fixed Effects and Instrumental Variables). The main focus of the analysis has to do with differences by sector (public vs. private). In Cambodia, the average educational attainment of workers in the public sector is significantly higher compared to the private sector. Without considering issues of selection into the public vs. the private sector, the wage premium for one additional year of schooling in the private sector is about twice that in the public sector for both men and women. Furthermore, the average return to one additional year of potential labor market experience is higher in the private sector. This raises questions about the reasons for the self-selection of more educated workers in the public sector in Cambodia. The picture changes drastically, especially in the case of female employment, once the assumption that the location of individuals in the public and private sectors is the outcome of a random process. However, after correcting for selection bias using Heckman's correction, one additional year of schooling still increases earnings by more in the private sector for men, but the spread between sectors narrows. However for women, one additional year of schooling increases earnings in the public sector by more than in the private sector. Furthermore, now the return to one additional year of potential labor market experience is significantly higher in the public sector, for both men and women. Other findings indicate that the supply of more educated workers has outstripped demand, resulting in a decline in the return to tertiary education and a stable return to secondary education. The dynamics of the demand and supply of skills and their changes over the time suggest that the supply of post-primary skills is adequate, except perhaps in the private sector.

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File URL: http://www.ntu.edu.sg/hss2/egc/wp/2008/2008-05.pdf
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Bibliographic Info

Paper provided by Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre in its series Economic Growth centre Working Paper Series with number 0805.

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Length: 26 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:nan:wpaper:0805

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  1. Joshua D. Angrist & Alan B. Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," NBER Working Papers 3572, National Bureau of Economic Research, Inc.
  2. Pedro Carneiro & James J. Heckman, 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," NBER Working Papers 9055, National Bureau of Economic Research, Inc.
  3. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  4. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
  5. John Bound & David A. Jaeger, 1996. "On the Validity of Season of Birth as an Instrument in Wage Equations: A Comment on Angrist & Krueger's "Does Compulsory School Attendance Affect Scho," NBER Working Papers 5835, National Bureau of Economic Research, Inc.
  6. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  7. Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, Elsevier.
  8. Pencavel, John, 1998. "Assortative Mating by Schooling and the Work Behavior of Wives and Husbands," American Economic Review, American Economic Association, vol. 88(2), pages 326-29, May.
  9. Colm Harmon & Hessel Oosterbeek, 2000. "The Returns to Education: A Review of Evidence, Issues and Deficiencies in the Literature," CEE Discussion Papers 0005, Centre for the Economics of Education, LSE.
  10. Trostel, Philip & Walker, Ian & Woolley, Paul, 2002. "Estimates of the economic return to schooling for 28 countries," Labour Economics, Elsevier, vol. 9(1), pages 1-16, February.
  11. Altonji, Joseph G & Dunn, Thomas A, 1996. "The Effects of Family Characteristics on the Return to Education," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 692-704, November.
  12. Arabsheibani, Reza & Mussurov, Altay, 2006. "Returns to Schooling in Kazakhstan: OLS and Instrumental Variables Approach," IZA Discussion Papers 2462, Institute for the Study of Labor (IZA).
  13. James J. Heckman & Edward J. Vytlacil, 2000. "Local Instrumental Variables," NBER Technical Working Papers 0252, National Bureau of Economic Research, Inc.
  14. James Heckman, 1997. "Instrumental Variables: A Study of Implicit Behavioral Assumptions Used in Making Program Evaluations," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 441-462.
  15. William N. Evans & Edward Montgomery, 1994. "Education and Health: Where There's Smoke There's an Instrument," NBER Working Papers 4949, National Bureau of Economic Research, Inc.
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