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Wage returns to education in Ethiopia

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  • Eskander Alvi
  • Seife Dendir

Abstract

In this paper, we aim to provide robust estimates of wage returns to education in Ethiopia. Previous estimates vary widely based on the scope and size of the study sample, variables employed, and estimation method. We use two recent rounds of national labour force survey data and a pseudo- (or synthetic) panel framework to address the well-known potential endogeneity of schooling in wage regressions. Birth-year cohort based pseudo-panel estimate of the return to an additional year of education is between 14 percent and 16 percent, 4 to 5 percentage points higher than that from ordinary least squares (OLS). The significant downward bias in OLS is further confirmed by two-year pseudo-panel estimates and remains robust, to a large extent, as we use an alternate model, change the estimation sample, and address selection bias concurrently with endogenous schooling using a novel approach. We discuss some possible explanations in the context of Ethiopia.

Suggested Citation

  • Eskander Alvi & Seife Dendir, 2020. "Wage returns to education in Ethiopia," Oxford Development Studies, Taylor & Francis Journals, vol. 48(1), pages 70-84, June.
    • Handle: RePEc:taf:oxdevs:v:48:y:2020:i:1:p:70-84
    DOI: 10.1080/13600818.2019.1672145
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    2. Dai Binh Tran & Sasiwimon Warunsiri Paweenawat, 2023. "The returns to education and wage penalty from overeducation: New evidence from Vietnam," Bulletin of Economic Research, Wiley Blackwell, vol. 75(4), pages 1267-1290, October.

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