What Explains Wage Differentials for the Urban Wage Earners? : Returns to Education for Ethiopia’s Urban Wage Employed
The Ethiopian labor market is facing the dual challenge of creating new employment opportunities for the rapidly expanding labor force and improving the quality of existing jobs in the labor market. In this paper, the authors estimate an earnings f...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/undefined/612921632214376102/What-Explains-Wage-Differentials-for-the-Urban-Wage-Earners-Returns-to-Education-for-Ethiopia-s-Urban-Wage-Employed http://hdl.handle.net/10986/36398 |
| Summary: | The Ethiopian labor market is facing
the dual challenge of creating new employment opportunities
for the rapidly expanding labor force and improving the
quality of existing jobs in the labor market. In this paper,
the authors estimate an earnings function for the urban
wage-employed to understand how investment in human capital
shapes labor market outcomes and to what extent human
capital returns have been realized. Their key findings show
that there are significant gains associated with acquiring
higher levels of education in the urban labor market.
Interestingly, the authors also find that the margin of
completed primary compared to incomplete primary education
is critical in explaining earning gains. This finding has
important implications for education policies in Ethiopia, a
country in which about five percent of gross domestic
product (GDP) is invested on education annually with nearly
half of the budget ear-marked for tertiary level education.
Understanding the returns from various levels of education,
in different sectors, regions, as well as gender gaps in
earning are critical to think about public investment
choices and labor market policies that can support nudging
market inclusiveness, equity, and efficiency. Investments by
the government aimed at incentivizing completion of primary
education can go a long way in ensuing higher wages and
improving standards of living in Ethiopia. |
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