Modelling cognitive skills, ability and school quality to explain labour market earnings differentials

Stellenbosch Working Paper Series No. WP08/2011
 
Publication date: 2011
 
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
[protected email address] (Department of Economics, University of Stellenbosch)
 
Abstract:

Attempts to explain wage differences between race groups in South Africa are constrained by the fact that quality of education is known to differ greatly between groups, thus the unexplained portion of the wage gap may be much affected by such differences in education quality. Using a simulation model that utilises school-leaving (matric) examination results and educational attainment levels to generate estimates of education quality, we find that much of the wage gap can indeed be explained by differences in education quality. Thus the unexplained residual, often identified with labour market discrimination, usually greatly over-estimates such discrimination. This emphasises even more strongly the need for greater equity in educational outcomes, particularly in the often unobserved quality of education.

 
JEL Classification:

J7, J24, J31

Keywords:

South Africa, education quality, wages, labour market, Oaxaca-Blinder decomposition, discrimination, economics of education

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Even with the release of data showing a record high unemployment rate in 2020Q4, it turned out to be a fairly good week for the SA economy. Daily new COVID-19 infections remained well contained, while the second batch of 80 000 J&J vaccines arrived (albeit controversially with the grounded SAA being the carrier). In addition, relative to the October...

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