Please use this identifier to cite or link to this item: https://elibrary.tucl.edu.np/handle/123456789/906
Title: Returns to Education in Nepal
Authors: Gurung, Dipendra
Keywords: Education;society
Issue Date: 2007
Publisher: Faculty of Education
Institute Name: Faculty of Education
Level: Ph.D.
Abstract: A considerable amount of public funds have been invested in education, in the belief that the full human potential may be achieved by raising the standards of educational attainment. The main concern in this study is whether these resources invested in education have been efficiently allocated. The general approach in the economic of education is to treat educational expenditure as investment in human capital and calculate the yield to educational investment in the same manner as for physical capital. This approach is used in this study to examine the efficiency of resource allocation in education. The theoretical framework is provided by the human capital theory, the basic premise being that variations in income are due partly to difference in labor productivity as a consequence of differing amounts of human capital acquired by workers via education or other means. The profitability measure used in this study is the internal rate of return. The purpose of this study was to examine the contribution of education to individual earnings in the wage sector and household incomes from farm and non-farm activities in the non-wage sector. The two main sources of data in estimating the return to education in Nepal were Nepal Living Standard Surveys (NLSS I, 1995/96) and (NLSS II, 2003/04). Mincerian standard human capital earning functions and short –cut methods were applied to Nepal Living Standard Surveys (NLSS I, 1995/96) and (NLSS II, 2003/04) data collected by CBS and World Bank in an attempt to provide evidence on rates of returns to years of schooling and education level in Nepal. Earnings from individual wage sector, household farm holdings, and non-farm enterprises were analyzed to investigate the contribution of educational investment in Nepal. This study estimated private rates of return to years of schooling using Mincerian basic earning function method in the earning data obtained from wage sector, household farm holdings, and non-farm enterprises. Moreover, this study estimated private and social rates of return using mincerian extended earning method function in the earning data obtained from wage sector. Mincerian earning function method was extended to earnings from farm and non-farm enterprises. Short-cut method was used to estimate social rates of return to education level from wage earnings. The data were analyzed using STATA Version 8.2 computer software. Hypotheses testing were done in 95%, 99% and 99.99% confidence interval. Multicolinearity, heteroscedasticity, and normality test were carried out to diagnose the problem of estimation process. The estimated results revealed that each extra year of schooling is profitable at the national level. The return to females is higher than males. Urban areas, Hill, Terai belt, and private schools got favorable returns. Non agriculture wage earners revealed high returns as compared to agriculture wage earners. Upper income quintile and urban areas got more favorable return. Primary education has a very high social rate of return. Tertiary education has a very high private rate of return relative to its social rate of return, while secondary education has relatively low private and social returns – a finding suggests increased private spending at university level and shift of public funds to other levels. Average household education and highest schooling in the household have a significant and a positive contribution to net earnings from agriculture and non agriculture enterprises. The study identified the specific policy implications for educational policy development for Nepal were: (a) top priority should be given to primary education as a form of human resource investment; (b) secondary and higher education should be pursued alongside with primary education in a program of balanced human resource development; (c) there exists room for private finance at the university level; (d) shifting of funds towards primary and secondary levels to raise quality and rates of return is urgent; (e) public funds should target female population, bottom quintiles and rural regions; (f) government should provide better infrastructure and modern farming inputs to improve farmer-efficiency from additional education; (g) government provide tax-break and other incentives to open up small financial/personal services enterprises from private sector; (h) educational investments are fairly attractive to other investment at both private and social level. By this, it is a clear indication that access to education could help poor population groups to raise their earnings. (i) education planners in Nepal should treat education as an important investment activity, not as consumption expenditure; (j) economic criteria should serve as baseline in making investment decisions in education, and (k) from a strictly efficiency point of view, investment in education of backward religion group and women needs to be expanded.
URI: http://elibrary.tucl.edu.np/handle/123456789/906
Appears in Collections:English Language Education

Files in This Item:
File Description SizeFormat 
Cover Page(6).pdf45.25 kBAdobe PDFThumbnail
View/Open
Chapter page(1).pdf23.97 MBAdobe PDFView/Open


Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.