Methodology The data Directory UMM :Data Elmu:jurnal:E:Economics of Education Review:Vol19.Issue3.Jun2000:

292 H.K. Siphambe Economics of Education Review 19 2000 291–300 to-date rates of return to education figures for Botswana. 2 The results from this paper are useful for three major purposes. Firstly, the results are useful as a guide to edu- cation policy in Botswana, particularly relating to efficient allocation of scarce resources between the dif- ferent levels of education, and how funding and access to different levels affect equity. Secondly, they contrib- ute to the debate as to whether the pattern of rates of return to education provided by Psacharopoulos do hold for Botswana given the current labour market conditions in Botswana. Lastly, they provide a test of the empirical usefulness of the human capital model in the economy of Botswana. Botswana has had impressive economic growth since gaining independence in 1966. Much of the success is attributed to the exploitation of major diamond deposits discovered 1 year after independence. Nevertheless, important aspects of Botswana’s political economy — including political pluralism and sound economic man- agement — have been singled out as major factors con- tributing to this success story Harvey Lewis, 1990; Colclough McCarthy, 1980. Despite the country’s impressive performance in terms of both growth and increased expenditures on education and other basic needs, the economy is challenged by a set of socio-economic problems. One of the major chal- lenges to the economy is that there is unlikely to be a major growth in revenue in the future, yet there will be need to finance the growing expenditures. In fact, for the first time in 16 years, the financial year 19992000 has a deficit budget of P400 million, or 1.5 of GDP. How- ever, the deficit is not much of a problem yet as it can be financed by drawing on government cash balances accumulated over the previous years Republic of Bots- wana, 1999. What this implies is that government will, in future, need to curtail its expenditures, including expenditures on education. For many years education has received a lion’s share of the budget.

2. Methodology

The model used is the Human Capital Model developed by Mincer 1974 with some modifications. In this respect, education is seen as an investment in oneself during school and later through on-the-job training. We run OLS on an earnings equation specified as follows: ln Y5a1b3Prim1c3LowSec1d3HighSec1e 3Tertiary1f3T1g3T 2 1h3Hrs1i3Fam where Prim, Lowsec, Highsec and Tertiary are dummies 2 Botswana is a country in southern Africa, a single citizen of the country is a Motswana and the plural is Batswana. for education categories, T is on-the-job experience, 3 Hrs is hours worked and Fam is a Family background vari- able measured by the education of the head of the house- hold. The rate of return to the kth level of education r k is estimated by subtracting the coefficient of D k − 1 from that of D k and dividing by the number of years of schooling at the kth level; i.e. r k = b k 2b k − 1 n k . For instance, for pri- mary education the rate of return to that level is calcu- lated as r primary versus illiterates = bS p , where S p is the number of years it takes to complete primary education, which is normally 7 years in Botswana. The coefficients are first adjusted by e coefficient 21 to correct for an issue raised by Halvorsen and Palmquist 1980. 4

3. The data

Two sets of data are used: the Household Income and Expenditure Survey HIES and supplementary survey data collected by the author. The supplementary survey was necessary to test for some of the issues in which HIES data are inadequate. HIES data were provided by 3608 households living in randomly selected dwellings all over Botswana. These households were selected from dwellings within 144 blocks equivalent to an enumer- ation area but sometimes smaller randomly selected from 3088 blocks. This represents approximately 5 of the total number of blocks. The supplementary data were provided by a subset of the households selected for the CSO HIES using proportionality to size of the blocks. Twenty-five percent of the sample was collected from urban areas and urban villages.

4. The political economy of education in Botswana