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To train or to educate? Evidence from Tanzania

  • Francis Teal
  • Godius Kahyarara
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    In this paper we ask how the returns to academic education compare with the return to two types of training drawing on labour force data from Tanzania`s manufacturing sector. The first is vocational training or attending a technical college as part of schooling, the second is on-the-job training in a firm. There has been much dispute in the literature as to whether the returns to vocational or academic training are higher. We show that in addressing this question in a schooling system where entry occurs at differing levels it is necessary to allow both for the entry level into vocation or technical school and for the characteristics of the firm in which the worker is employed. If the firm fixed effect captures a substantial element of unobserved worker quality then the return to vocational education, at the level at which it occurs, exceeds that on academic education. However as the return to education rises with its level the return to any form of vocational training is less than that achieved by those who reach A-Level and above. While those with current training earn more this effect disappears once we allow for firm fixed effects. One interpretation of this result is that the effects of the training get embodied in the quality of the workforce. The paper highlights the importance of panel data which enables the effects of such unobservables to be identified in assessing returns to both vocational education and training.

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    File URL: http://www.gprg.org/pubs/workingpapers/pdfs/gprg-wps-051.pdf
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    Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number GPRG-WPS-051.

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    Date of creation: 01 Sep 2006
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    Handle: RePEc:oxf:wpaper:gprg-wps-051
    Contact details of provider: Postal: Manor Rd. Building, Oxford, OX1 3UQ
    Web page: http://www.economics.ox.ac.uk/
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    1. David Card, 2000. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," NBER Working Papers 7769, National Bureau of Economic Research, Inc.
    2. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, May.
    3. M�ns Söderbom & Francis Teal & Anthony Wambugu & Godius Kahyarara, 2006. "The Dynamics of Returns to Education in Kenyan and Tanzanian Manufacturing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(3), pages 261-288, 06.
    4. Moenjak, Thammarak & Worswick, Christopher, 2003. "Vocational education in Thailand: a study of choice and returns," Economics of Education Review, Elsevier, vol. 22(1), pages 99-107, February.
    5. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    6. Geeta Kingdon & Justin Sandefur & Francis Teal, 2006. "Labour Market Flexibility, Wages and Incomes in Sub‐Saharan Africa in the 1990s," African Development Review, African Development Bank, vol. 18(3), pages 392-427.
    7. Marcel Fafchamps & Måns Söderbom & Najy Benhassine, 2006. "Job Sorting in African Labor Markets," CSAE Working Paper Series 2006-02, Centre for the Study of African Economies, University of Oxford.
    8. Psacharopoulos, George, 1993. "Returns to investment in education : a global update," Policy Research Working Paper Series 1067, The World Bank.
    9. Soderbom, Mans & Teal, Francis & Wambugu, Anthony, 2005. "Unobserved heterogeneity and the relation between earnings and firm size: evidence from two developing countries," Economics Letters, Elsevier, vol. 87(2), pages 153-159, May.
    10. Paul Bennell, 1996. "General versus vocational secondary education in developing countries: A review of the rates of return evidence," Journal of Development Studies, Taylor & Francis Journals, vol. 33(2), pages 230-247.
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