Disparities in Labor Market Outcomes across Geopolitical Regions in Nigeria. Fact or Fantasy?

Abstract

Questions focused on understanding Africa's lack of growth are not new in economics research. Ethnic fragmentation is one of the many reasons suggested for lack of growth of many developing countries especially in Africa. This is because many countries that are ethnically fragmentized find it difficult agreeing on societal goals and instead, focus on achieving dominance in the political arena of the country. These actions usually lead to: ethnic conflict, corruption, instability and other factors that hamper growth in the long-run. Nigeria is no stranger to the scenario described above. The basis of most ethnic and regional conflicts is claims of the marginalization of particular groups. Documented and anecdotal evidence of marked differences in basic economic and social indicators are usually the starting point for these assertions. However, general perception and beliefs play a role in solidifying these claims. In this paper, evidence of labor market disparities in Nigeria is sought first using descriptive analysis of the data. Subsequently, I test the null hypothesis that there are no significant differences in labor market outcomes across geopolitical regions using econometric techniques. By means of an instrument first suggested by Osilli and Long (2003) but constructed similarly to Uwaifo (2006), I estimate the returns to education using two stage least squares. This instrument is based on the exogenous implementation and withdrawal of free education across regions and states in Nigeria over time. I derive estimates for both Northern and Southern Nigeria.