What Explains Wage Differentials for 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. This paper estimates an earnings function for the...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/undefined/722931639413892502/What-Explains-Wage-Differentials-for-Urban-Wage-Earners-Returns-to-Education-for-Ethiopia-s-Urban-Wage-Employed http://hdl.handle.net/10986/36737 |
| 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. This paper
estimates 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. The key findings show that there are
significant gains associated with acquiring higher levels of
education in the urban labor market. Interestingly, the
analysis also finds 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 5 percent of gross domestic product is
invested in education annually, with nearly half of the
budget earmarked for tertiary-level education. Understanding
the returns from various levels of education, in different
sectors, regions, as well as gender gaps in earnings is
critical for thinking 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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