Academic journal article Asian Development Review

Rates of Return to Schooling in Thailand

Academic journal article Asian Development Review

Rates of Return to Schooling in Thailand

Article excerpt

(ProQuest: ... denotes formulae omitted.)

I. Introduction

This paper addresses the rate of return to formal education in Thailand. Human capital investment is essential to turn technical change and physical capital investment into productivity gains (Schultz 1975, Rosenzweig 1995, McMahon 1999). Progress in the Thai economy has shifted from agriculture to manufacturing and services (Krongkaew 1995; Krongkaew, Chamnivickorn, and Nitithanprapas 2006). In 1960, 82.3% of the Thai population was engaged in agriculture, while only 17.7% were engaged in nonagriculture activities in the manufacturing and services sector. In contrast, more than 50% of the labor force has been employed outside agriculture since 2000 (Table 1, Figure 1). Economic growth and restructuring have fundamentally changed the Thai labor force. The increasing demand for labor in the manufacturing and services sectors will require workers to gain more human capital. Workers need to apply knowledge and specific skills to perform tasks in nonagriculture sectors. Several studies have been done on the returns to education in Thailand. Amornthum and Chalamwong (2001 ) find that every additional year of education after the upper primary level leads to an increase in earnings, with males usually receiving higher returns than females. Hawley (2004) finds that completing an additional year of schooling provides an additional 11%-12% of monthly log earnings for both men and women. The impact of an additional year of schooling for urban residents is higher than for rural residents (Warunsiri and McNown 2010, Hawley 2004). Hawley (2003) and Moenjak and Worswick (2003) find that vocational secondary education provides higher earnings returns than general secondary education. Mehta et al. (2013) reveal that high-skilled services helped to lift college returns moderately in Thailand. Furthermore, Mehta et al. (2011) find little evidence of overeducation in unskilled jobs in Thailand. There is still limited evidence to answer the following questions: If students decide not to continue to higher education, which option between vocational education or general education will give higher private and social returns? And, if students decide to continue higher education, what are the private and social returns on a university degree?

This study's objective is to investigate the rates of return to schooling in Thailand based on a Mincerian earnings function. The empirical results suggest that schooling has a positive and significant impact on private and social returns to schooling. Secondary vocational education gives much higher private and social returns to schooling than secondary general education. However, after secondary education, evidence shows that completing higher education (e.g., bachelor's degree) gives private returns of 37.2% and social returns of 21.3%. These findings call into question the belief that aggregate demand for the college-educated increases rapidly. The paper is organized as follows. Section II discusses Thailand's educational system, policies, and planning. Section III gives an overview of the data. Section IV describes the empirical strategy. Section V discusses empirical results. Section VI highlights the policy implications and concludes.

II. Background on Thailand's Education System, Policies, and Planning

A. Thailand's Education System

Formal education in Thailand-which is based on the National Education Act, 1999 (revised 2002) and the Compulsory Education Act, 2002-is divided into two levels : basic and higher education. Basic education includes pre-elementary, elementary, and secondary levels. Higher education, or postsecondary education, includes diploma and degree levels. Table 2 presents goals and a description for each level of education. The pre-elementary level is a 2- or 3-year course that aims to develop physical, mental, intellectual, and emotional skills among students. The elementar}' level is a 6-year course emphasizing basic literacy and numerical skills, and cultivating desirable behavior. …

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