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Abstract
We study returns to academic specialisation for Indian corporate sector workers by analysing cross-sectional data on male employees randomly selected from six large firms. Our analysis shows that going to college pays off, as it brings significant incremental returns over and above school education. However, the increase in returns is more pronounced in the specialisations of management and engineering, and less so in the specialisations of science, arts and commerce. Some of the less attractive specialisations, such as commerce and science, tend to make up by rewarding progression from Bachelors to Masters. Short-course diplomas are also rewarding.
Acknowledgement
We would like to thank the anonymous referees and the editor of this journal for their helpful comments. The usual disclaimer applies.
Notes
1. These firms are publicly traded large business houses and were among the top 10 firms in terms of annual turnover during the study period.
2. The source of the data was company annual reports, which up to 1987 contained detailed data on employees above a cut-off income level. A change in regulation led to disappearance of this dataset from the public domain after 1987.
3. Ideally, one should have longitudinal data for such studies. But for India the national household survey data are not longitudinal. Moreover, rarely do we find precise information on education, income and work experience from such surveys. One could get such data from the firm sources as public limited companies were required to disclose employee details, and 1987 was the last year to obtain these data. After 1987 a change in the regulation allowed firms to report the details of their managerial staff only. Building a panel data going back several years prior to 1987 proved difficult.
4. Commerce specialisation in India largely involves studying accountancy and book-keeping and does not go into business management issues. This, in turn, helps commerce graduates to start careers in accounting firms, tax consultancy and related services, whereas management graduates aim for junior managerial positions in the corporate sector.
5. Our period of analysis falls in between the study periods of Duraisamy (Citation2002) – between 1981 and 1991. When combined with other studies, our work may help us to understand how the Indian industry valued higher education in the run up to large-scale economic reforms undertaken in 1991, after which the economy moved to a higher growth path.
6. In 1986–1987, the exchange rate was roughly $1 = Rs 15.
7. Our results mostly capture features of the Indian corporate sector and may not relate to hiring practices of other sectors such as small and medium enterprises.
8. The raw data were available only in hard copy. Compiling a large dataset with all the employees proved too costly. Hence a 10% sample was decided upon.
9. The definition of informal sector is loose. Generally firms that are small and are outside a number of work-related regulations fall in this category.
10. However, prior to 1980 in many states of India higher secondary meant 11 years of schooling, and engineering undergraduate studies were five years long. Such discrepancies were gradually eliminated between 1977 and 1987. Therefore, we had to choose a cutoff year and make adjustments in the years of schooling. This led us to assign 11 years of schooling to higher secondary, if the individual was older than 27 years at the time of our study. For higher education, we have used the programme durations that are standard across colleges in India. However, there might be some odd exceptions which remained unaccounted for. Thus, for older workers, Bachelors would mean 14 years of educations and Masters 16 years of education.
11. We have a handful of cases of PhD or similar post-Masters education; however, they have been clubbed with the category Masters.
12. We assumed that individuals did not take any break from their education. It is quite uncommon in India for students to take time off from their school or college education. Because of a persistent problem of oversubscription in most colleges, fresh applicants are always admitted in preference to applicants with interrupted schooling. However, after admission some students might have to repeat a year. As long as this proportion is small, our results remain unaffected.
13. Tenure may capture effects of on-the-job learning, training and firm-worker matching. In the absence of additional information, we cannot separate out these possible effects.
14. Arts refers to humanities, not fine arts.
15. Admittedly, our results are subject to validity of the strong distributional assumptions and the log linear functional form. However, we feel it is reasonable to assume a normal distribution in case of our large sample and the log linear form as is a common practice in similar econometric studies.
16. All estimations were done in Stata (release 11).