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The relationship between labour force status and educational attainment: Evidence from a system of simultaneous equations model

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  • Alam, Khorshed
  • Mamun, Shamsul Arifeen Khan

Abstract

This study presents an estimate of the joint determination of labour market status and educational attainment in Australia using cross-sectional data collected by the Australian Bureau of Statistics. This paper is based on the premise that achieving an increasing level of educational attainment and labour supply does not happen in isolation, rather they are determined jointly. Applying a simultaneous system of two-equations model, the study finds that there is a feedback effect between educational attainment and labour market status. In the labour market equation the effects of achieving a higher educational attainment on the probability of being employed has been statistically significant and the effect is negative. Thus, previous studies that ignored the feedback effects and used a single equation model have produced biased and inaccurate estimates of the effects of educational attainment on labour market outcome.

Suggested Citation

  • Alam, Khorshed & Mamun, Shamsul Arifeen Khan, 2016. "The relationship between labour force status and educational attainment: Evidence from a system of simultaneous equations model," Economic Analysis and Policy, Elsevier, vol. 52(C), pages 55-65.
    • Handle: RePEc:eee:ecanpo:v:52:y:2016:i:c:p:55-65
    DOI: 10.1016/j.eap.2016.07.005
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    2. Waliu Olawale Shittu & Norehan Abdullah & Habiba Muhammed Bello Umar, 2019. "Does Fertility Affect Female Labour Participation Differently in Malaysia and Singapore?," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 62(2), pages 201-217, June.
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    More about this item

    Keywords

    Simultaneous equations model; Labour supply; Education; Australia;
    All these keywords.

    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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