A statistical analysis of endogeneity and instrumental variables of education on income in Namibia
| dc.contributor.author | Nanyemba, Maria K. | |
| dc.date.accessioned | 2024-06-05T08:51:38Z | |
| dc.date.available | 2024-06-05T08:51:38Z | |
| dc.date.issued | 2024 | |
| dc.description | A thesis submitted in partial fulfilment of the requirements for the degree of master of science in applied statistics and demography | |
| dc.description.abstract | Education is a well-known driver of income and a causal factor for economic prosperity and social development in modern society. It provides one with capital such as qualification, knowledge and skillsets relevant to secure stable gainful employment, as well as increase one’s income, improve health conditions and general welfare. However, the measurement of the influence of education most often suffers from endogeneity suspicion due to the possible presence of a correlation between the education variable and the error term. This presents a critical issue when performing a cause-and-effect relationship analysis as neglecting endogeneity can lead to unreliable estimation results even when dealing with large samples because estimators of the model parameters will be inconsistent. To date, most studies that focuses on analysing the effect of education in Namibia have done so with other factors such as fertility and not income, while most of these studies used regression approaches such as the linear regression and logistic regression methods to perform their respective analyses. However, no study has simultaneously tried to account for the endogeneity of both education and income in Namibia. Thus, using the 2015/2016 Namibia Household Income and Expenditure Survey as well as accounting for the possible presence of endogeneity and for non-linear effects of continuous observed confounders, this study aimed at estimating the impact of education on income in Namibia, in addition to exploring different modelling strategies to capture the relationship between income and education, and other socio-economic and socio demographic factors. A total of 495,311 households containing 2,250,122 individuals aged 18 to 60 years who have been to school and have earned salary and/or wage as their source of income ii in the last 12 months of the survey period were considered in this study. Three different modelling strategies were carried out, namely: (i) Basic Ordinary Least Squares (OLS) regression without considering the clustering, stratification and weighting factors, (ii) Basic OLS regression considering the clustering, stratification and weighting factors, and (iii) Instrumental Variables & Two Stage Least Squares (IV-2SLS) regression, while the best fit modelling strategy to use for exploring the relationship between income and education, and other socio-economic and socio-demographic factors was determined using the Durbin and Wu-Hausman test of endogeneity. Results from this study showed that majority (82.1%) of the households in Namibia derived their source of income from salary and/or wage in 2015/2016. The IV-2SLS was identified as the best modelling strategy to use since the Durbin and Wu-Hausman test of endogeneity confirmed the presence of endogeneity (i.e, education must be endogenous), thus, making the OLS strategies unreliable to use. Furthermore, factors such as education, age, sex, marital status, type of work, employment period, total hours worked and transport mode to work had positive and significant influences on income, while factors such as region, dwelling unit type, main material for the wall, household size, and no contribution to investment had a negative and significant influences. However, the type of employer had a mixed effect on income. In addition, the IVs estimators revealed that the average rate of return of schooling was 13% which was higher compared to the OLS estimates of 5%. It is therefore recommended that the Namibian government and policy makers consider boosting more funding into education, especially in communities within the rural and underdeveloped regions still having traditional dwelling households whose structures are made of corrugated iron/zinc sticks, wooden poles, clay and/or cow dung. In addition, as part of their poverty alleviation strategies, the government should iii ensure the distribution of equitable resources, particularly the educational resources, to enhance the development of rural and underdeveloped regions so that they too can benefit from high-quality education opportunities in the country | |
| dc.identifier.uri | http://hdl.handle.net/11070/3881 | |
| dc.language.iso | en | |
| dc.publisher | University of Namibia | |
| dc.subject | Income | |
| dc.subject | Education | |
| dc.subject | Instrumental variables | |
| dc.subject | Endogeneity | |
| dc.subject | Ordinary least squares | |
| dc.subject | Two stage least squares | |
| dc.subject | Namibia | |
| dc.title | A statistical analysis of endogeneity and instrumental variables of education on income in Namibia | |
| dc.type | Thesis |