The relationship between labour force status and educational attainment: Evidence from a system of simultaneous equations model

Khorshed Alam and Shamsul Arifeen Khan Mamun

Economic Analysis and Policy, 2016, vol. 52, issue C, 55-65

Abstract: This study presents an estimate of the joint determination of labour market status and educational attainment in Australia using cross-sectional data collected by the Australian Bureau of Statistics. This paper is based on the premise that achieving an increasing level of educational attainment and labour supply does not happen in isolation, rather they are determined jointly. Applying a simultaneous system of two-equations model, the study finds that there is a feedback effect between educational attainment and labour market status. In the labour market equation the effects of achieving a higher educational attainment on the probability of being employed has been statistically significant and the effect is negative. Thus, previous studies that ignored the feedback effects and used a single equation model have produced biased and inaccurate estimates of the effects of educational attainment on labour market outcome.

Keywords: Simultaneous equations model; Labour supply; Education; Australia (search for similar items in EconPapers)
JEL-codes: I25 J21 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:52:y:2016:i:c:p:55-65

DOI: 10.1016/j.eap.2016.07.005

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