Education and labor market outcomes in South Africa: Evidence from the National Income Dynamics Study

Type Thesis or Dissertation - Doctor of Philosophy
Title Education and labor market outcomes in South Africa: Evidence from the National Income Dynamics Study
Publication (Day/Month/Year) 2015
Existing literature is in agreement on the importance of education in the determination of labor market outcomes. Using data from South Africa’s National Income Dynamics Study, this thesis explores this relationship. It does this firstly, by examining the effect of school quality measured by school inputs–pupil-teacher ratio and expenditure per pupil–on educational attainment in South Africa. Following a reduced form production function approach, a partial generalized ordered probit is applied in the analysis. The thesis finds that both pupil-teacher ratio and expenditure per pupil have strong and significant effects on educational attainment of African South Africans. The ratio is more important at lower schooling levels, indicating a ‘lagged effect’ on educational attainment. A small increase in expenditure has large effects. This suggests declining returns to fiscal investment in education. Alternatively, it could indicate inefficiency in the use of funds, or compensatory funding of poor schools. Secondly, we examine the extent to which wage difference shown among district councils in South Africa can be explained by the magnitude of external returns to education. We use an augmented Mincerian regression to investigate this, considering the effect of district council share of college graduates on workers’ wages. The study employs
District Council’s annual average climate to instrument for the share of district council college graduates. The results show that a 1% increase in a District Council’s share of college graduates raises workers’ wages by 5-8%. There are also spillovers effects, with college graduates being the beneficiaries. Thirdly, we estimate unemployment duration by gender and by competing risk, that is, exits into employment or economic inactivity. We use the Kaplan-Meier estimator and the Cox proportion hazard model in these estimations. The results from both estimators show factors that influence unemployment differ by exits, and their effects vary by gender. The hazard rates show that transition rate into employment is higher for men than for women with similar characteristics. They show that age and race significantly influence employers’ choice between educated men and women. However, this bias is less obvious at higher levels of education.

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