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Returns to Education in Sri Lanka: A Pseudo Panel Approach

Author

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  • Rozana Himaz
  • Harsha Aturupane

Abstract

This study employs the pseudo-panel approach to estimate returns to education among income earners in Sri Lanka. Pseudo-panel data are constructed from nine repreated cross-sections of Sri Lanka’s Labor Force Survey data from 1997-2008 for workers born during 1953-1974. The results show that for males, one extra year of education increases monthly earnings by about 5 per cent using the pseudo panel estimation rather than 8 per cent as in the OLS estimation. This indicates that not controlling for unobservables such as ability and motivation bias the OLS estimation of returns upwards by about 3 per cent on average. It also suggests that males with higher ability seem to be acquiring more years of education contrary to what has been observed recently in countries such as Thailand (Warunsiri and McKnown 2010) where the opportunity cost of education seems to be high.

Suggested Citation

  • Rozana Himaz & Harsha Aturupane, 2012. "Returns to Education in Sri Lanka: A Pseudo Panel Approach," Economics Series Working Papers 615, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:615
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    File URL: http://www.economics.ox.ac.uk/materials/papers/12049/paper615.pdf
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    References listed on IDEAS

    as
    1. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
    2. Verbeek, Marno & Nijman, Theo, 1993. "Minimum MSE estimation of a regression model with fixed effects from a series of cross-sections," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 125-136, September.
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    Cited by:

    1. Kumara, Ajantha Sisira, 2015. "Wage Differentials in Sri Lanka: The case of a post-conflict country with a free education policy," MPRA Paper 68068, University Library of Munich, Germany, revised 25 Nov 2015.

    More about this item

    Keywords

    Sri Lanka; Education; Returns; Pseudo panels; Synthetic cohorts;

    JEL classification:

    • I00 - Health, Education, and Welfare - - General - - - General
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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