The returns to education : increasing with experience or decreasing with expansion

Abstract

This paper explores the relationship between education and employment, specifically the tendency for the coefficient on education to depend on the length of employment experience. A case study of Tanzania, an economy with a low average level of education among employees, a rapid expansion of the educational system in the years prior to the survey, and an inflexible labor market, is used for the examination. The analysis supports the hypothesis that education and employment experience do have an interactive effect on earnings. Additionally, the study observes a process of filtering down in Tanzania, i.e. as education has expanded, so educated entrants to the labor market have accepted lesser jobs. This filtering down might explain the evidence in light of the role that occupation plays in the determination of earnings.