Returns to Education in Sri Lanka: A Pseudo Panel Approach
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 Lankaâ€™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.
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- Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
- Verbeek, Marno & Nijman, Theo, 1993.
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Elsevier, vol. 59(1-2), pages 125-136, September.
- Verbeek, M. & Nijman, T., 1992. "Minimum MSE Estimatin of a Regression Model with Fixed Effects from a Series of Cross Sections," Papers 9201, Tilburg - Center for Economic Research.
- Nijman, T.E. & Verbeek, M.J.C.M., 1993. "Minimum MSE estimation of a regression model with fixed effects from a series of cross sections," Other publications TiSEM 34c1104a-a64b-4030-be99-b, Tilburg University, School of Economics and Management.
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