Education and Labour Earnings Inequality in Tanzania: Evidence from Quantile Regression Analysis

Abstract

This paper uses Tanzania’s 2014 Integrated Labour Force Survey data to investigate the relationship between education and labour-earning inequalities. The quantile regression method is applied to compute returns to education at different points of the earnings distribution. The estimation result reveals significant variation in the coefficients of marginal returns to education across earning distributions, and the estimated coefficients are higher at the top of earning distribution. The marginal returns to education are higher for tertiary education than primary and secondary levels across all quantiles of the earnings distribution. The results also show that OLS coefficients conceal variation in the returns to education across the earning distribution. This finding suggests that education contributes positively to the widening of earnings dispersion in Tanzania, mainly due to the strong heterogeneous effects of education on earnings. Accordingly, it is vital to have a policy in Tanzania to reduce disparities in educational attainment between the least and most educated individuals.

JEL: D24 J63 L63 O490