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Earnings functions, labour market discrimination and quality of education in South Africa

Author

Listed:
  • Doubell Chamberlain

    () (Genesis Analytics)

  • Servaas van der Berg

    () (Department of Economics, Stellenbosch University)

Abstract

Education is a key determinant of earnings, as several South African studies have confirmed. Years of schooling completed, however, provides an imperfect approximation of the effective level of education achieved, mainly due to variations in the quality of education received. This study addresses this issue by, for the first time in South Africa, incorporating quality of education in the modelling of earnings. Differences in quality of education are viewed as a form of pre-labour market discrimination. By decomposing the wage gap before and after controlling for educational quality, more accurate estimates of the true levels of labour market discrimination are obtained. The main hypothesis tested is that controlling for quality will reduce the component of the wage gap ascribed to labour market discrimination. The results show a systematic decrease in the labour market discrimination component with increased adjustments for quality of education. Almost half of the previous labour market discrimination can be explained by differences in quality, yet the proportion of racial wage differentials ascribed to labour market discrimination is still found to be significant. The clear implication is that current estimates of labour market discrimination are exaggerated and a more careful analysis of earnings is required to re-assess the levels of discrimination in the South African labour market.

Suggested Citation

  • Doubell Chamberlain & Servaas van der Berg, 2002. "Earnings functions, labour market discrimination and quality of education in South Africa," Working Papers 02/2002, Stellenbosch University, Department of Economics.
  • Handle: RePEc:sza:wpaper:wpapers2
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    File URL: https://www.ekon.sun.ac.za/wpapers/2002/wp022002/wp-02-2002.pdf
    File Function: First version, 2002
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    References listed on IDEAS

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    7. Servaas van der Berg & Louise Wood & Neil le Roux, 2002. "Differentiation in black education," Development Southern Africa, Taylor & Francis Journals, vol. 19(2), pages 289-306.
    8. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
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    11. Behrman, Jere R & Birdsall, Nancy, 1983. "The Quality of Schooling: Quantity Alone is Misleading," American Economic Review, American Economic Association, vol. 73(5), pages 928-946, December.
    12. Heckman, James & Layne-Farrar, Anne & Todd, Petra, 1996. "Human Capital Pricing Equations with an Application to Estimating the Effect of Schooling Quality on Earnings," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 562-610, November.
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    Citations

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    Cited by:

    1. Maciej, Szelewicki & Tyrowicz, Joanna, 2009. "Labour Market Racial Discrimination in South Africa Revisited," MPRA Paper 16440, University Library of Munich, Germany.
    2. Victoria Hosegood & Anne Case & Cally Ardington, 2009. "Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 22-48, January.
    3. Bazillier, Remi, 2008. "Core Labor Standards and Development: Impact on Long-Term Income," World Development, Elsevier, vol. 36(1), pages 17-38, January.
    4. Nicola Branson & Julia Garlick & David Lam & Murray Leibbrandt, 2012. "Education and Inequality: The South African Case," SALDRU Working Papers 75, Southern Africa Labour and Development Research Unit, University of Cape Town.
    5. Nicoli Nattrass & Richard Walker, 2005. "Unemployment And Reservation Wages In Working-Class Cape Town," South African Journal of Economics, Economic Society of South Africa, vol. 73(3), pages 498-509, September.
    6. Martine Mariotti & Juergen Meinecke, 2009. "Nonparametric Bounds on Returns to Education in South Africa: Overcoming Ability and Selection Bias," ANU Working Papers in Economics and Econometrics 2009-510, Australian National University, College of Business and Economics, School of Economics.
    7. Dieter von Fintel, 2006. "Earnings bracket obstacles in household surveys – How sharp are the tools in the shed?," Working Papers 08/2006, Stellenbosch University, Department of Economics.
    8. Haroon Bhorat & Sumayya Goga, 2012. "The Gender Wage Gap in the Post-apartheid South African Labour Market," Working Papers 12148, University of Cape Town, Development Policy Research Unit.
    9. Daniela Casale, 2004. "What has the Feminisation of the Labour Market ‘Bought’ Women in South Africa? Trends in Labour Force Participation, Employment and Earnings, 1995-2001," Working Papers 04084, University of Cape Town, Development Policy Research Unit.
    10. Dieter Von fintel, 2007. "Dealing With Earnings Bracket Responses In Household Surveys - How Sharp Are Midpoint Imputations?," South African Journal of Economics, Economic Society of South Africa, vol. 75(2), pages 293-312, June.

    More about this item

    Keywords

    earnings functions; labour market; discrimination; education; South Africa;

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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