Returns to Education in Tanzania

Educational expansion in Tanzania following the education sector reform policy of 1995 has increased the enrollment rate at all levels of education primary, secondary to university and the number of trained young people in the labor market. Motivated by the education policy and the increase in educational expenditure, this study provides estimates of the private returns to different levels of education for the year 1991/1992, 2000/2001 and 2006/2007. The study uses data from the Tanzanian household budget survey for the mentioned years. Regressions of individual earnings on a set of explanatory variables including education and workings hours show that there are strong positive effects on individual earnings as the number of years of schooling increases. The highest returns are at the tertiary level while returns to primary education display a concave trend during the period. Also the study reveals that men had higher returns almost at all levels of education. Hence higher return to tertiary education indicates opportunity for further investment. Therefore in order to benefit from the increased rate of return to tertiary education, government has to increase its investment on tertiary level as a means of allocating scarce resources in more productive investment which are highly paid in the labor market. -- Relevance to Development Studies -- Human capital is among the factors of production which has an influence on economic growth because it is through human capital investment in education that an individual acquires new knowledge on how to use new technology and therefore, investing in education has a positive effect on individual produc-tivity and economic growth. Given the limited resources a country has, it is important to invest in education level which generates more return and this will be possible only through analyzing the return at different levels of education for decision making.