Returns to Education between the Self-employed and Employed Sectors: Evidence from Malaysia

A. Idrus, S. Cameron

Abstract


Investment in human capital in terms of returns to education
is considered a crucial factor that contributes to the remarkable
economic growth especially in the rapidly developing countries. Since
poverty and education are closely related, this paper attempts to
examine whether returns to education differ between the self-employed
and employed sectors in the rural Malay area in Rantau, Malaysia. Using
the adjusted Mincerian Earnings function and the dummy variables
approach, the empirical finding shows that returns to education do not
differ between the self-employed and employed sectors in the rural Malay
society. Thus, it can be deduced that there is no significant difference
between the self-employed and employed sectors in those two sectors.
Interestingly, it also reveals that private rates of return (ROR)
increase by the level of schooling and they are the highest at the
Secondary level. Finally, appropriate strategies are further suggested
to alleviate poverty in the case study area.

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DOI: https://doi.org/10.30541/v39i3pp.263-268

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