297 H.K. Siphambe Economics of Education Review 19 2000 291–300
Table 8 Basic Mincerian earnings function by sector of employment — corrected for choice of employment SS Data
a
Variable Public sector
Private sector Parastatals
Constant 6.4 24
4.9 45.08 7.8 14.
Education 0.09 7.8
0.09 7 0.08 5.1
Experience 0.028 2.5
0.07 5.5 0.057 2.5
Experience square 20.00023 20.6
20.0013 22.5 20.00077 21.09
Inverse Mills Ratio 20.6 24.9
0.47 2.8 21.2 24.1
R
2
adjusted 0.57
0.36 0.64
N 276
499 79
a
Values in parentheses are t-statistics. Asterisks indicate level of significance: , 1 level; , 5 level.
variable is significant at the 1 level for all three sectors.
9
7. Private rates of return to education
Table 9 summarises the results of a Mincerian earn- ings function that has education as a non-continuous
variable. We now have 1–0 dummies for the five school- ing cycles.
10
All coefficients are significant at the 1
Table 9 Earnings function with schooling cycles dummies — corrected
for censoring bias HIES
a
Variable All
Constant 5.07 35.8
Primary 0.4 9.7
Lower secondary 1.1 23.3
High secondary 1.9 28.8
Tertiary 2.1 21.9
Experience 0.057 7.7
Experience square 20.00095 27.4
Inverse Mills Ratio 20.78 26.6
R
2
adjusted 0.44
Sample size N 2891
a
Values in parentheses are t-statistics. , Significant at 1 level.
9
Refer to Appendix A, Table A2, for probit results for choice between sectors of employment.
10
Primary education takes 7 years, lower secondary 3 years, upper secondary 2 years and university 4 years, except for a
Degree in Law.
level and have the right signs. Table 10 is a summary of the private rates of return to the different schooling
cycles, which are derived from Table 9. The rate of return is highest for upper secondary 185, then lower
secondary 84 and lowest for primary education 7.
8. Summary of results and conclusions
The general results from the previous analysis are that the rates of return to education do not decline by level
of education. They are highest for upper secondary edu- cation, and lowest for primary education. The general
trend, based mainly on Latin American countries and the aggregate ones reported by Psacharopoulos, is for the
rates of return to be highest for primary followed by sec- ondary and lowest for tertiary education. Our results also
show that the rates of return to the two secondary school education cycles are quite distinct. Higher secondary
education has higher private rates of return than lower secondary.
The rates of return to education figures from this study, particularly for primary education, are quite low
compared with those estimated by the USAID 1984 study. It is evident therefore that private rates of return
to education have been declining, especially for lower secondary and primary education cycles. The falling
rates are quite expected given the dramatically changing
Table 10 Annual private rate of return to schooling for each schooling
cycle with dummies
a
Education Primary
Lower Upper
Tertiary level
secondary secondary
Rate of 7
83 185
38 return
a
Source: Based on Table 9.
298 H.K. Siphambe Economics of Education Review 19 2000 291–300
labour market conditions, particularly on the supply side. There was a significant increase in the supply of gradu-
ates as proxied by total student enrolment to the labour market, while job opportunities rose less fast. In other
words, the rate of employment creation was not adequate to absorb all the graduates entering the labour market.
The latest figure on unemployment is estimated at 21 and is highest for those under 25 years of age. It is also
highest for those with 1–3 years of secondary education, followed by those with primary education Republic of
Botswana, 1996.
The result of this mismatch between supply and demand for labour was that competition for the few
available jobs became intense. The competition created more demand for education at all levels. The labour mar-
ket responded to the increases in supply of graduates by escalating minimum job requirements. The result is that
school leavers are filtering down occupation hierarchies. For instance, jobs that were previously the preserve of
illiterates and primary school graduates are now com- peted for by secondary school graduates.
Although rates of return are generally low, primary education is the most affected. These rates are low
because the earnings differentials between workers with primary education and those with no education are very
small. Therefore, monetary benefits of going to primary school are very small. This is a result of a phenomenon
which has already been discussed: that the primary school graduates were being pushed out of the labour
market to very low-paying jobs including informal activities. There are of course some major non-monetary
benefits to primary education, which this model does not capture; for instance political awareness, health, etc.
Moreover, the benefits for primary education are cap- tured as benefits to other levels of education for those
who go beyond primary education.
While lower secondary expanded at a very fast pace, upper secondary education expanded at a relatively
lower pace. About 30 or less of the lower secondary completers got places into upper secondary Republic of
Botswana, 1993. It was this group of graduates who were obtaining an increasing share of the mainly skilled,
middle level jobs that used to be the preserve of lower secondary school leavers. The additional cost of acquir-
ing this privileged access to relatively few good job openings was usually only 2 more years of full time edu-
cation. The net income benefits as shown by the earn- ings differential between this group and the lower sec-
ondary school have been quite high.
Tertiary education has also been highly profitable, as shown in the results from the HIES data. This is mainly
due to high earnings compared to earnings of those with upper secondary education level.
Generally rates of return to education increase by level of education. Apart from the changes in the labour mar-
ket that have already been discussed, these results may have other major implications about education. First, that
more able people obtain more schooling. The higher rates for higher levels will therefore be a result of higher
ability. Second, that quality of education may be improv- ing as one moves up the education ladder. However, this
study does not measure changes in school quality and ability differences. Therefore, it is not possible to be pre-
cise about the changes in ability and school quality. A more important issue arising from these results is that
the British-type of schooling usually contains a strong filtering and screening mechanism through which more
able students, or students from households at the higher end of the income distribution, transit up the educational
hierarchy. Guisinger, Henderson and Scully 1984 make a similar point about the positive relationship between
rates of return and level of education for Pakistan.
Finally, education in Botswana appears to exacerbate income inequalities. The high rate of return for higher
levels of education indicate that the distance between the earnings of the highest and lowest worker in the skill
hierarchy is large, which may be one reason why Bots- wana has such a high income inequality.
11
9. Policy implications
