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Education, Employment and Earnings of Secondary School-Leavers in Tanzania: Evidence from a Tracer Study

  • Samer Al-Samarrai

    ()

    (Institute of Development Studies, University of Sussex)

  • Barry Reilly

    (Poverty Research Unit at Sussex, Department of Economics, University of Sussex)

The extent of information on labour market outcomes and the earnings of educated groups in Tanzania, and Sub-Saharan Africa more generally, are limited. This is particularly so for individuals who fail to gain access to wage employment and are required to rely on exploiting self-employment opportunities. The current paper, using a recently completed tracer survey of secondary school completers, analyses the impact of education and training on individual welfare through the estimation of earnings equations. Our empirical evidence suggests that the rates of return to educational qualifications are not negligible and, at the margin, provide an investment incentive. However, we find little evidence of human capital effects in the earnings determination process in the self-employment sector. Information contained in the tracer survey allowed the introduction of controls for father’s educational background and a set of school fixed effects designed to proxy for school quality and potential labour market network effects. The analysis shows that the inclusion of these controls tends to reduce the estimated rates of return to educational qualifications. This emphasizes the potential confounding role of school quality/network effects and parental background for rate of return analysis. We would argue that a failure to control for such background variables potentially leads to an over-statement in the estimated returns to education. A comparison of our results with evidence from other countries in the region shows that despite an extremely small secondary and university education system the private rates of return to education in the Tanzanian wage employment sector are relatively low.

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Paper provided by Poverty Research Unit at Sussex, University of Sussex in its series PRUS Working Papers with number 31.

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Length: 43 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:pru:wpaper:31
Contact details of provider: Postal: School of Social Sciences and Cultural Studies, Falmer, Brighton BN1 9SN
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Web page: http://www.sussex.ac.uk/Units/PRU/
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  1. Paul Glewwe, 2002. "Schools and Skills in Developing Countries: Education Policies and Socioeconomic Outcomes," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 436-482, June.
  2. Psacharopoulos, George & Patrinos, Harry Anthony, 2002. "Returns to investment in education : a further update," Policy Research Working Paper Series 2881, The World Bank.
  3. Chesher, Andrew & Irish, Margaret, 1987. "Residual analysis in the grouped and censored normal linear model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 33-61.
  4. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  6. Psacharopoulos, George, 1988. "Education and Development: A Review," World Bank Research Observer, World Bank Group, vol. 3(1), pages 99-116, January.
  7. Simon Peters, 2000. "On the use of the RESET test in microeconometric models," Applied Economics Letters, Taylor & Francis Journals, vol. 7(6), pages 361-365.
  8. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-12, March.
  9. John P. Haisken-DeNew & Christoph M. Schmidt, . "Inter-Industry and Inter-Region Differentials: Mechanics and Interpretation," Working Papers 9504, SELAPO Center for Human Resources.
  10. Knight, J B & Sabot, R H, 1981. "The Returns to Education: Increasing with Experience or Decreasing with Expansion?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 43(1), pages 51-71, February.
  11. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
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