Public vs. Private Education and the Labor Market Disparities in Nepal: Evidence From the Blinder-Oaxaca Decomposition

Abstract

ABSTRACT: The debate between private and public education is a widely discussed issue in personal and policy forums globally. In Nepal, private schools have grown significantly due to the perceived advantages associated with them. This paper tests if there are significant differences in labor-market outcomes for individuals educated in private schools compared to those educated in public schools. Research Methodology and Data: We employ nationally representative household survey data from the Nepal Living Standards Survey (NLSS III), conducted by the Central Bureau of Statistics (CBS) Nepal in 2010/11, utilizing the Living Standards Measurement Survey (LMSS) methodology developed by the World Bank. We apply the Blinder-Oaxaca decomposition method to examine the relationship between educational attainment and four distinct measures of labor-market outcomes: labor force participation, employment status, job security, and wage income. Initially, we estimate these outcomes separately for individuals in private education and those in public education. Subsequently, we calculate and analyze whether the disparities in estimated values can be attributed to differences in education. Our findings reveal significant labor-market disparities between individuals participating in private education and those in public education. Those with private education display lower rates of labor force participation and reduced employment rates, suggesting fewer working hours. However, those employed within this group enjoy more secure salaried positions. Furthermore, private education is linked to higher wage incomes, primarily attributable to longer educational periods. The Blinder-Oaxaca decomposition demonstrates that most of these disparities are associated with variations in educational backgrounds. Consequently, the results highlight the role of segregated education in contributing to labor-market inequality, emphasizing the impact of private schools in exacerbating economic disparities in Nepal. The findings underscore the significance of educational attainment in ameliorating disparities between individuals educated in public and private schools. To address these issues, policymakers should concentrate on strategies aimed at increasing the duration of education for public school students, such as providing free, quality higher education. By narrowing the educational gap between private and public institutions, the nation can work towards diminishing wage and job security disparities, fostering a more equitable society. These findings also have relevance for countries grappling with similar socio-economic challenges, initiating essential policy discussions.