Why Does the Productivity of Education Vary across Individuals in Egypt? Firm Size, Gender, and Access to Technology as Sources of Heterogeneity in Returns to Education
The paper estimates the rates of return to investment in education in Egypt, allowing for multiple sources of heterogeneity across individuals. The paper finds that, in the period 1998-2006, returns to education increased for workers with higher ed...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110727094819 http://hdl.handle.net/10986/3503 |
| Summary: | The paper estimates the rates of return
to investment in education in Egypt, allowing for multiple
sources of heterogeneity across individuals. The paper finds
that, in the period 1998-2006, returns to education
increased for workers with higher education, but fell for
workers with intermediate education levels; the relative
wage of illiterate workers also fell in the period. This
change can be explained by supply and demand factors. On the
supply side, the number workers with intermediate education,
as well as illiterate ones, outpaced the growth of other
categories joining the labor force during the decade. From
the labor demand side, the Egyptian economy experienced a
structural transformation by which sectors demanding
higher-skilled labor, such as financial intermediation and
communications, gained importance to the detriment of
agriculture and construction, which demand lower-skilled
workers. In Egypt, individuals are sorted into different
educational tracks, creating the first source of
heterogeneity: those that are sorted into the general
secondary-university track have higher returns than those
sorted into vocational training. Second, the paper finds
that large-firm workers earn higher returns than small-firm
workers. Third, females have larger returns to education.
Female government workers earn similar wages as private
sector female workers, while male workers in the private
sector earn a premium of about 20 percent on average. This
could lead to higher female reservation wages, which could
explain why female unemployment rates are significantly
higher than male unemployment rates. Formal workers earn
higher rates of return to education than those in the
informal sector, which did not happen a decade earlier. And
finally, those individuals with access to technology (as
proxied by personal computer ownership) have higher returns. |
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