Discrepancy in Effect of Education

Abstract

Although researchers agree that education has positive effect on income, literatures reveal there are significant discrepancies in the effect of education on income. Becker (1993), Gerber & Cheung (2008), and Schultz (1993) point out that estimating the effect of education must take into account many other variables. To carefully examine the effect of education on income, this paper included urbanization and occupation as additional control variables. Using national survey data in Thailand and the cumulative logit model, my finding supports those of Becker’s and Schultz’s that the effect of education on wages is positive but not constant across different levels of education. While the finding indicates that education higher than secondary school significantly increases one’s chance of making higher income, the fact that being in Bangkok and Metropolitan area increases one’s odd of earning more by 7.4 times suggests that the effect of other variables on income could be more powerful than that of education variable. When comparing this finding with literature in the past, it suggests that effect of education is not time invariant as it is sensitive to the changing structure in the labor market. Positive effect of higher level of education is likely to be more persistence than that of primary and secondary education to changes in the labor market.

Keywords: effect of education, human capital, cumulative logit model, categorical response