Aashish Mehta
Changing Patterns in returns to education and employment structure in three Asian countries

Abstract: We analyze large nationally representative surveys of the labor force from three developing Asian economies (India, the Philippines and Thailand) at two points in time separated by a decade or more. Secondary and tertiary education attainment rose in the interim. At the same time, returns to secondary education fell, while returns to tertiary education were much more buoyant. We document these shifts, allowing for inter-cohort dynamics. Returns to college rose for older workers, but fell for recent Thai and Filipino entrants to the labor force. We ask whether and how these changes can be linked to changes in employment structure. A novel decomposition permits us to attribute the shifting returns to education to the evolving structure of employment and inter- and intra-industry wage patterns. Secondary returns fell sharply in every sector as secondary-educated workers rapidly became available, while employment structures shifted slowly to absorb them. Conversely, modern services were instrumental in lifting the returns to tertiary education. A new type of comparative statics exercise reveals that the Philippines will need to industrialize if it is to leverage higher growth from its human capital stock, while returns to secondary education in India have come to depend less on the manufacturing sector. The inter-cohort divergence in returns to college arises in the Philippines and Thailand because excess young collage-educated workers are pushed into low-wage or low return jobs, while older college graduates are more likely to find work in modern services. The largest and growing share of services employment has been in low-wage traditional services. From an employment perspective, “Services-led development” therefore appears to be a red herring.

JEL: I21,J21,O12,O53.
Keywords: Asia, Mincerian returns, Structural change.



Download Full Text