Kawonn Azizi

Abstract

The human capital theory developed by Becker and Mincer suggests that personal income varies according to the amount of investment in human capital, i.e. the education and training undertaken by individuals or groups of workers. This study is designed to test the claims of human capital theory and to find the education premium in the labor market of Afghanistan. The main aim of the study is to estimate the impact of education on average income. In order to make this estimation, data was collected from five provinces of Afghanistan (Kabul, Nangarhar, Balkh, Herat, Kandahar) by interviewing 500 individuals. For the data analysis, we used Mincer OLS model by adding other important variables, e.g. job type, gender, type of work, marital status and health status, added to the model.

The empirical results of the study indicate that, with other factors held constant, one additional year of education increases monthly income by 8.6 percent. Similarly, one additional year of experience (age) increases income by 4.5 percent. However, as this variable has a non-linear relationship with income, it decreases progressively after a specific age. The study also found that men earn significantly more (34 percent) than their female counterparts. This difference could be due to the distribution of human capital or due to women working in lower income jobs. Furthermore, the study showed that forms of employment also have a significant impact on income.

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