Education, Employment and Earnings of Secondary School-Leavers ...

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5.1 Earnings Equation – The EmployeesThe interval regression model estimates for the employees’ sample are reported intable 4. A brief review of the diagnostics is in order as a prelude to a more detaileddiscussion of the earnings equation estimates themselves. All the estimated modelscomfortably pass the RESET. The result for normality is more mixed and on theborderline for our preferred specification (4) in table 4. We believe, however, it isinnocuous to infer that the assumption of normality provides a reasonableapproximation for the unobservables governing the determination of the earningsprocess for employees. The null hypothesis of homoscedasticity is decisively rejectedfor the four estimated models and the Huber (1967) adjustment is thus used toconstruct a robust variance-covariance matrix for the coefficient estimates. Thegoodness of fit measure for our preferred specification is healthy by the standards ofcross-sectional earnings equations. However, it should be stressed it does not havethe conventional interpretation associated with the R 2 generated using the moreconventional OLS procedure. 26[Table 4]The estimated coefficient for the selection correction term is poorly determined in allfour specifications and suggests that the sample of employees comprise a randomdrawing from the sample of school-leavers available to us. In addition, it is worthnoting that the estimated selection effect is not materially affected by the inclusion ofadditional regressors in the earnings equation. This tentatively suggests that the resultin regard to selection bias may be insensitive to the set of identifying instrumentsused.The discussion of the estimates will primarily focus on our preferred specification (4)in table 4 but cross-reference will be made to other specifications where necessary.The cohort effect achieves statistical significance within the 5% level for our26 In other words, we cannot use these measures to infer that a certain proportion of the variation inmonthly earnings is explained by variation in the explanatory variables. The measure provides theproportional change in the likelihood function consequent in the inclusion of the explanatory variables.19
preferred specification. This variable is designed to proxy for age effects and suggestthat the average ceteris paribus earnings for the 1990 cohort are 27% higher than forthe more recent 1995 cohort of leavers. There is also some evidence of gender andreligious advantage in employee monthly earnings with the male premium estimatedat 23.6% and Muslims securing about 16% more than non-Muslims, on average andceteris paribus. The gender effect is perhaps not surprising although it is alsointeresting to note that wage employment opportunities grew faster for femalecompleters over the 1990s than their male counterparts. The wage premium associatedwith the Muslim respondents in the survey may in part reflect the influence of socialnetworks related to the school (but not directly captured by the school effects) thatprovide good jobs for completers.There is a sizeable return of nearly 34% for those with jobs located in Dar-es-Salaamcompared to the relatively heterogeneous base comprising all other Tanzanian areasother than Dodoma. This in part may reflect cost of living differences given the muchhigher cost of living in Dar es Salaam compared to other (including urban) areas inTanzania. Approximately one-third of the employees in the sample work in the healthand education sector and earn, on average and ceteris paribus, 16.2% less in monthlyterms than workers in other sectors. 27 Given the recent expansion in educationalaccess in Tanzania more secondary school completers will be absorbed into theeducation sector as teachers, but the lower wages are unlikely to attract the bestcandidates in this sector. The monthly earnings of public sector workers, however, arenot statistically different from their private sector counterparts.We now turn to the estimates for the human capital measures.The estimatedcoefficient for the training variable is robust across all the reported specifications andthe estimates are generally invariant to the inclusion of the additional controls forparental background and school effects. In interpreting the estimate it is useful totranslate the effect into an annualised return. Thus, an additional year of generaltraining raises monthly earnings by 8.4%, on average and ceteris paribus.estimated effect for on-the-job experience raises monthly earnings by a more modest27 The inclusion of these controls might also proxy for the number of hours worked per month as theseare likely to be lower in the public, health and education sectors. However, the crudeness of this proxymeasure is readily acknowledged.The20
Page 1 and 2: Education, Employment and Earnings
Page 3 and 4: The structure of the paper can now
Page 5 and 6: Despite large absolute increases in
Page 7 and 8: nine studies reviewed for sub-Sahar
Page 9 and 10: It should be noted, however, that e
Page 11 and 12: history, current activity and incom
Page 13 and 14: In order to understand how the mode
Page 16 and 17: freedom for this test. In regard to
Page 18 and 19: where φ(·) denotes the probabilit
Page 22 and 23: 4.8% per annum in the first three s
Page 24 and 25: confirm to some extent that unobser
Page 26 and 27: The ceteris paribus earnings for th
Page 28 and 29: [Table 7]The rate of return for a u
Page 30 and 31: 6. ConclusionsA key finding of our
Page 32 and 33: that the rates of return to educati
Page 34 and 35: Knight, J.B. and Sabot, R.H. (1981)
Page 36 and 37: Table 1: Highest level of education
Page 38 and 39: Table 4 (Cont’d)SelectionCorrecti
Page 40 and 41: Table 5 (cont’d)Selection Correct
Page 42 and 43: Table A1: Variable DescriptionVaria

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