Impact of education on labour market outcomes in rural and urban India

Abstract

This paper examines the returns to education with respect to three labour market outcomes namely wages, employment and occupation using the National Sample Survey Office (NSSO) 68th round (2011-12) data. Wage equation (without selection bias) results point to the fact that returns to education increase at an increasing rate as the level of education increases and the impact of education is found relatively higher in the case of urban than rural areas. In case of employment, the study finds that compared to illiterates, the chances of higher educated people going to agriculture sector is less. This is true even in the case of rural areas whereas the interactive variable (education with rural dummy) is found negatively associated with employment in agriculture sector. Occupation results suggest that there is a strong association between higher education (under graduate and graduate and above) with professional occupations and less with agriculture and fishery and unskilled occupations, suggesting the need for improving education and creating quality employment opportunities in the rural areas that may help in arresting the growing urban burden.