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The causal impact of education on income: income inequality and poverty in Thailand

Student thesis: Doctoral Thesis

  • Siwaphon Phromwong
This dissertation focuses on two educational reforms in Thailand (1978 and 2000), using these policy initiatives to explore the impact of education on income, income distribution and poverty. Investigating the causal relationship between education attainment and income raises endogeneity concerns, both in terms of reverse causality and omitted variables. To overcome such limitations, the wage of individuals is estimated by using Two-stage least squares (2SLS) models. The years of schooling is instrumented by the year of birth of the individuals who were born around the cut-off year requiring pupils to attend 6 and 9 years, respectively, of compulsory education. This approach ensures that individuals are homogeneous in terms of individual characteristics (e.g. abilities, motivation) across groups because of the proximity of birth. We also include province fixed-effects to capture heterogeneity in economic development and quality of schools across geographic units. The estimations are extended to uncover both endogeneity and heterogeneity biases by using the Instrumental Variable Quantile Regression Methods (IVQR).

We found that the 9-year compulsory schooling reform has been more effective in extending access to education, especially for the disadvantaged, than the 6-year compulsory schooling reform. With the 6year compulsory schooling reform, we find statistically significant results that an additional year of schooling positively impacts individual incomes by about 13 percent. However, over half of the increase in average income is concentrated amongst the wealthiest individuals. Estimations for the 9-year compulsory schooling reform suggest that an additional year of schooling increases the monthly income of an individual on average by approximately 8.5 percent. Although the highest returns to education still accrue to the wealthiest income group, the income increased of the poorest and poor income groups become higher and statistically significant compared with the estimated results from the 6-year compulsory schooling reform. The study also shows that the main contribution to a reduction in poverty in Thailand is through economic growth. In order to eradicate poverty and reduce income inequality, universal education to Lower-secondary level (9th grade) is recommended.
Original languageEnglish
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Award dateSep 2017

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