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Market Returns to Education in Pakistan, Corrected for Endogeneity Bias

Author

Listed:
  • Sajjad Haider Bhatti

    (Department of Statistics, Government College University)

  • Muhammad Aslam

    (BZU - Bahauddin Zakariya University)

  • Jean Bourdon

    (IREDU - Institut de Recherche sur l'Education : Sociologie et Economie de l'Education [Dijon] - UB - Université de Bourgogne - UBFC - Université Bourgogne Franche-Comté [COMUE], CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper estimates the Mincer wage model for Pakistan's labor market, using a relatively recent dataset and new independent variables. We employ instrumental variables and two-stage least squares to address the problem of the endogeneity of education. Our results show that the returns to education are biased downward due to endogeneity, with significant wage gaps emerging among different regions, between genders and between urban and rural job markets. The study's choice of instruments has conceptual as well as empirical grounds. Our findings establish that the wage determination process is different for males and females across provincial labor markets.

Suggested Citation

  • Sajjad Haider Bhatti & Muhammad Aslam & Jean Bourdon, 2018. "Market Returns to Education in Pakistan, Corrected for Endogeneity Bias," Post-Print halshs-01845506, HAL.
    • Handle: RePEc:hal:journl:halshs-01845506
    DOI: 10.35536/lje.2018.v23.i1.A4
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    References listed on IDEAS

    as
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    Cited by:

    1. Henna Ahsan, 2024. "Impact of Education Mismatch on Earnings: Evidence from Pakistan’s Labor Market," PIDE-Working Papers 2024:1, Pakistan Institute of Development Economics.

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    More about this item

    Keywords

    Endogeneity of education; human capital model; instrumental variables; Mincer regression; labor market; returns to schooling; Pakistan;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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