Economics of Education Review 19 2000 291–300 www.elsevier.comlocateeconedurev
Rates of return to education in Botswana
Happy Kufigwa Siphambe
Department of Economics, University of Botswana, Private Bag 0022, Gaborone, Botswana Received 10 June 1998; received in revised form 1 January 1999; accepted 9 March 1999
Abstract
Using data from a Household Income and Expenditure Survey and data collected by the author, this paper presents up-to-date private rates of return to education in Botswana. The empirical fitness of the Mincerian Earnings Function
is also tested. The major results are: 1 rates of return rise by level of education; 2 the empirical fitness of the human capital model is quite robust; 3 education is not income equalising; 4 women are paid less than men despite being
on average more highly educated than men. The policy implications are: there is room for private financing at the upper secondary and tertiary levels of education; employment creation has to be pursued vigorously; there is a need
to address the equity and gender issues.
2000 Elsevier Science Ltd. All rights reserved.
JEL classification: I21; J31 Keywords: Botswana; Education; Labour
1. Introduction
George Psacharopoulos has during the last 20 years produced comprehensive reviews of rates of return to
education in
developed and
developing countries
Psacharopoulos 1989, 1981.
1
On the basis of his calcu- lation of aggregate rates of return to education, Psacharo-
poulos has shown that the following pattern of rates of return to education is discernible throughout the world.
1. The returns to education are higher in the private sec- tor than the public sector supporting the productivity-
enhancing role of education in the private sector and some screening role and compressed pay structure in
the public sector.
2. Returns decline by level of schooling reflecting dim- inishing returns to schooling, i.e. returns to primary
Tel.: +
267-355-2769; fax: +
267-585-099. E-mail address: siphambenoka.ub.bw H.K. Siphambe.
1
See Psacharopoulos 1994 for a summary of those patterns of rates of return.
0272-775700 - see front matter
2000 Elsevier Science Ltd. All rights reserved. PII: S 0 2 7 2 - 7 7 5 7 9 9 0 0 0 4 2 - 4
schooling are higher than secondary education, and the latter is higher than returns to higher education.
3. The pattern of rates of return remains stable as coun- tries develop with only relatively minor declines.
4. Rates of return in developing countries especially Africa are higher than in advanced market econom-
ies. 5. Returns to education for females are higher than for
males because of their lower foregone earnings, as reflected by their lower wages.
Bennel 1996 argues that Psacharopoulos’ conven- tional rates of return patterns almost certainly do not pre-
vail in sub-Saharan Africa under current labour market conditions. Questioning the problems emanating from
aggregation for example, different methodologies by authors, different country sizes and economic circum-
stances, data quality, etc., Bennel argues that we should dispense altogether with simple aggregate rates of return
to education and look for a pattern at country level.
Using original data from a 199495 Household Income and Expenditure Survey HIES and a supplementary
survey to HIES conducted by the author, we present up-
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
