Selection into Formal and Informal Employment in Uganda: The Role of Education

Abstract

This paper examines the role of educational attainment in being employed in Uganda. Using household panel data for four waves; 2005/06, 2009/10, 2010/11 and 2011/12, the study estimates correlated random effects models and analyses the
education-employment relationship.  We find a positive association between educational attainments and “not-working” in the static model but when state dependence is accounted for, the association disappears for all education levels except degree education which is not significant at conventional levels.  Therefore, it can be concluded that the observed positive association between education and “not-working” is a short term effect for individuals with less than degree education, but may persist
for individuals with degree education. With reference to informal sector employment, the results are mixed. They depict a heterogeneous sector which is hierarchical, whereby more educated individuals are observed in informal salaried work and less
educated individuals are observed working in household enterprises.  Further, there is a positive association between education and employment status which is strongest in the formal sector. All results vary by age group, gender and residence.

JEL Classification: J00, J01, J24