Mohammad Osman Adel

Abstract

This study estimates the effect of human capital (education, skills, and work experience and health status) on individuals’ earnings in Herat city in Afghanistan. The sample population for this study consisted of government employees, employees of non-governmental organizations (NGOs) and private sector firms and comprised 155 individuals. The study is based on the human capital theory, which indicates that the wage differential is the result of differences in human capital components that individuals bring to the labor market. Here Mincer’s model was employed to examine the economic return on human capital. The use of this model is a type of OLS method which relies on the natural logarithm of earnings/ wages as the dependent variable and components of human capital as the independent variables. The empirical findings of a regression model reveal that employees with high school and Bachelor’s and Master’s degree levels of education earn monthly wages which are 64.7%, 133.3% and 285.7% higher respectively than those of employees who have not been educated at all. Likewise, workers of private firms and NGOs enjoy 47.5% and 181.2% higher wages respectively compared to government employees. Similarly, the results of correlation analysis reveal that there is a positive and highly significant relationship between work skills, work experience and health status and monthly wages. These findings suggest that the human capital theory holds true in Afghanistan, which in turn should encourage policy makers and families to invest in human capital.

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