ESTIMATING THE RETURNS OF SELF-EMPLOYED AND SALARIED WORKERS IN MALAYSIA
Keywords:Economics of education, Human capital, Rate of return, Wage earners, Labour economics
Evidence from the literature suggested that there is a positive relationship between education and earning. However, to what extent the returns differ according to the choice of individual’s economics activity remain debatable particularly in developing countries? For various reasons, some would prefer to work independently, but others like to join a formal sector and received earnings frequently. Education returns of wage earners and self-employed workers are the main objective of this study. The method of this study is using Ordinary Least Square estimation on wage equation. Using males sample of a cross sectional data from 2002 to 2004, we found a trend of occupational choice and level of education for the formal sector is positive relatively. This paper argues that self-employed workers always obtained higher returns to education than their wage-earning counterpart. The data suggested that for those who obtained a higher credentials are more likely to involve in wage salaries rather than self-employed. A further research need to carry out to support a notation that selfemployed is enjoying a higher return.
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