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The Dynamics of Returns to Education in Kenyan and Tanzanian Manufacturing

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Author Info
Måns Söderbom (Centre for the Study of African Economies)
Francis Teal (Centre for the Study Of African Economies)
Anthony Wambugu (Kenyatta University, Nairobi, Kenya)
Godius Kahyarara (Economic & Research Foundation, Dar es Salaam)

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Abstract

The returns to education remain a central concern for development policy. In developed countries there is evidence that the returns to education have been rising.Evidence for changes over this period for developing countries is limited. In this paper we use data from Kenya and Tanzania to estimate returns to education for manufacturing workers and examine how these returns have changed from 1980 to the late 1990s. We find strong evidence that the earnings function is convex for both countries and document significant differences in the earnings profiles across cohorts, typically with stronger convexity amongst the young. We also find evidence of increasing convexity over the 1990s in Tanzania, but remarkable stability in Kenya.We test for the importance of ability bias and find convexity robust to endogeneity. Treating education as an endogenous explanatory variable generally results in higher estimated returns to education than what is obtained by OLS. Potential reasons for this result are discussed.

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Paper provided by EconWPA in its series Development and Comp Systems with number 0409041.

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Length: 30 pages
Date of creation: 23 Sep 2004
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Handle: RePEc:wpa:wuwpdc:0409041

Note: Type of Document - pdf; pages: 30
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Keywords: Returns to education; Africa; Kenya; Tanzania; manufacturing;

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Find related papers by JEL classification:
O - Economic Development, Technological Change, and Growth
P - Economic Systems

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bennell, Paul, 1996. "Rates of return to education: Does the conventional pattern prevail in sub-Saharan Africa?," World Development, Elsevier, vol. 24(1), pages 183-199, January. [Downloadable!] (restricted)
  2. Geeta Gandhi Kingdon, Jeemol Unni, 2001. "Education and Women’s Labour Market Outcomes in India," Education Economics, Taylor and Francis Journals, vol. 9(2), pages 173-195, August. [Downloadable!] (restricted)
  3. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September. [Downloadable!] (restricted)
  4. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-54, July. [Downloadable!] (restricted)
  5. Richard Blundell & James Powell, 2001. "Endogeneity in nonparametric and semiparametric regression models," CeMMAP working papers CWP09/01, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
  6. Amemiya, Takeshi, 1974. "The nonlinear two-stage least-squares estimator," Journal of Econometrics, Elsevier, vol. 2(2), pages 105-110, July. [Downloadable!] (restricted)
  7. Soderbom, Mans & Teal, Francis, 2004. "Size and efficiency in African manufacturing firms: evidence from firm-level panel data," Journal of Development Economics, Elsevier, vol. 73(1), pages 369-394, February. [Downloadable!] (restricted)
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  8. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September. [Downloadable!] (restricted)
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  9. Bigsten, A. & Collier, P. & dercon, S. & Fafchamps, M. & Gauthier, B. & Gunning, J.W. & Isaksson, A. & Oduro, A. & Oostendorp, R. & Pattillo, C. & Soderbom, M. & Teal, F. & Zeufack, A., 1998. "Rates of Return on Physical and Human Capital in Africa's manufacturing Sector," Working Papers Series 98-12, Centre for the Study of African Economies, University of Oxford.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Benhassine, Najy & Fafchamps, Marcel & Söderbom, Måns, 2006. "Wage Gaps and Job Sorting in African Manufacturing," CEPR Discussion Papers 6003, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Christophe Nordman & François-Charles Wolff, 2007. "On-the-job learning and earnings in Benin, Morocco and Senegal," Working Papers DT/2007/09, DIAL (Développement, Institutions & Analyses de Long terme). [Downloadable!]
  3. Al-Samarrai, Samer & Reilly, Barry, 2006. "Education, Employment and Earnings of Secondary School and University Leavers in Tanzania: Evidence from a Tracer Study," MPRA Paper 129, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Ruth Uwaifo Oyelere, 2007. "Africa’s Education Enigma? The Nigerian Story," IZA Discussion Papers 3097, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Abbas, Qaisar & Foreman-Peck, James, 2007. "The Mincer Human Capital Model in Pakistan: Implications for Education Policy," Cardiff Economics Working Papers E2007/24, Cardiff University, Cardiff Business School, Economics Section. [Downloadable!]
  6. Rijkers, Bob & Laderchi, Caterina Ruggeri & Teal, Francis, 2008. "Who benefits from promoting small and medium scale enterprises ? some empirical evidence from Ethiopia," Policy Research Working Paper Series 4629, The World Bank. [Downloadable!]
  7. Dimova, Ralitza & Nordman, Christophe Jalil & Roubaud, François, 2008. "Allocation of Labour in Urban West Africa: Implication for Development Policies," IZA Discussion Papers 3558, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Fox, Louise & Oviedo, Ana Maria, 2008. "Are skills rewarded in Sub-Saharan Africa ? determinants of wages and productivity in the manufacturing sector," Policy Research Working Paper Series 4688, The World Bank. [Downloadable!]
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