Education, Employment and Earnings of Secondary School-Leavers in Tanzania: Evidence from a Tracer Study*

The extent of information on labour market outcomes and the earnings of educated groups in Tanzania, and Sub-Saharan Africa more generally, are limited. This is particularly so for individuals who fail to gain access to wage employment and are required to rely on exploiting self-employment opportunities. The current paper, using a recently completed tracer survey of secondary school completers, analyses the impact of education and training on individual welfare through the estimation of earnings equations. Our empirical evidence suggests that the rates of return to educational qualifications are not negligible and, at the margin, provide an investment incentive. However, we find little evidence of human capital effects in the earnings determination process in the self-employment sector. Information contained in the tracer survey allowed the introduction of controls for father’s educational background and a set of school fixed effects designed to proxy for school quality and potential labour market network effects. The analysis shows that the inclusion of these controls tends to reduce the estimated rates of return to educational qualifications. This emphasizes the potential confounding role of school quality/network effects and parental background for rate of return analysis. We would argue that a failure to control for such background variables potentially leads to an over-statement in the estimated returns to education. A comparison of our results with evidence from other countries in the region shows that despite an extremely small secondary and university education system the private rates of return to education in the Tanzanian wage employment sector are relatively low. * The data used in this survey is from wider project undertaken in four Sub-Saharan African countries funded by the United Kingdom’s Department for International Development (DfID). Faustin Mukyanuzi of HR Consult implemented the survey in Tanzania and overall findings are reported in Mukyanuzi (2003). The views expressed in this paper are entirely those of the authors and do not necessarily represent the DfID’s own policies or views. ** Corresponding author.