Intergenerational Transmission of, and Returns To Human Capital And Changes Therein over Time: Empirical Evidence from Egypt

Over the last fifty years, Egypt has witnessed several reforms and shocks such as the need to absorb a huge influx of new and especially more educated entrants to the labor force. Virtually neglected, however, have been the long run effects of education, including those across generations. The purposes of this study are: (1) to measure and explain changes in the gender-specific short and medium term returns to education in different sectors (private and public, formal and informal, tradable and non-tradable), and (2) to examine the long-run effects of education from generation to generation and, in the process, to measure the extent to which, how and why intergenerational mobility has changed over the last twenty years. In estimating both the determinants of schooling (including its intergenerational transmission) and the returns to schooling and changes therein over time, the study applies a number of estimation techniques to data taken from family members of different generations from the 1988, 1998 and 2006 waves of the Egyptian Labor Market Survey (ELMS). The major substantive findings are: (1) that intergenerational mobility with respect to education has increased across generations, especially for those living in urban areas, (2) that parental education has positive influences on the returns to children’s education, implying that the influence of education of family members goes well beyond its direct influence on children’s education, (3) that both the level of education and the returns to education are strongly affected by location, with locations in rural areas and especially those in Upper Egypt being much less fortuitous than those in urban areas, (4) that there are some significant differences between the effects of the education of particular parents (father or mother) and grandparents on particular children (sons or daughters), (5) the returns to education based on earnings reported in the 2006 ELMS generally fall with the number of controls included and appear to be considerably lower than both estimates in developing countries and estimates for Egypt from the earlier 1988 and 1998 ELMS (especially for males). Educational reforms seem to have contributed to finding (1) (of increased intergenerational mobility over time) but seem to have been insufficient to offset the low and falling rate of return to schooling. The most important methodological conclusions are: (1) that in a context where the role of a parent’s education on that of his/her child is broader than a simple genetic one, grandparents’ education seems to be more suitable as a control variable than as an instrument for parents’ education, (2) that potentially at least a certain educational reform could serve as a suitable instrument for parents’ education but only if further research would allow us to identify differences in the speed of implementation of these reforms across Egypt’s regions.