2020 SCIENCELINE

Journal of Educational and Management Studies

J. Educ. Manage. Stud., 10(2): 22-29, June 25, 2020

License: CC BY 4.0,

ISSN: 2322-4770

DOI: https://dx.doi.org/10.51475/jems.2020.3

Estimate private rate of return on technical vocation school

and formal school: evidence from Kuwait

Humoud A. Alqattan

HIE, PhD, Training Staff, PAAET, Kuwait

^Email: ha.alqattan@paaet.edu.kw

ABSTRACT

Original Article

In this paper we asked what can account for the continuing provide technical vocational

education in Kuwait? Where the level of development is high and there are high wages

PII: S232247701800003-8

government jobs. On the other hand the researcher try to find which of education system

track, formal or technical vocation education system is more profitable for individuals in

Kuwait. We argue that the answers to these questions are connected through the nature of

the earning function and the importance of age effects. This paper will be complemented by

Rec. 14 April, 2020

Acc. 14 May, 2020

Pub. 25 June, 2020

an important gap in the development of tools and techniques for analysis part of the

education system in the State of Kuwait. This paper is important from three standpoints.

First, in order to estimate the effect of education track/path on earnings, the most recent

and nationally representative data is used which provides detailed information on the

variables. Second, it is an effort to provide an evidence for the comparison between

Vocational track/path and Formal track/path in Kuwait education system based on

individual earnings. Third, this study provides the policy makers with a helpful technique to

monitoring the expenditure on education. To provide policy makers and top management

with information needed for comparing technical vocation education with formal education

system in Kuwait, this paper offer a new evidence on continue providing technical vocation

education in Kuwait by using 2010 Kuwait Civil Service Commission employees database;

moreover it is an effort of estimating the private rate of return on formal and technical

vocation education system by applying the earning equation. The results suggested keep on

offering the technical vocation schools also; find a significant effect on wages depend on the

type of education track system. Moreover, the technical vocation education slightly higher

returns than the formal education.

Keywords

Kuwait education,

Private Rate of Return,

Rate of Return on Education,

Rate of Return on Technical

vocation,

Earning equation,

Mincer equation

is needed. In order to conduct the process of

development in Kuwait towards the achievement of

its aims, great interest and emphasis should be placed

on study of human capital investment accumulation.

This study will be complemented by an important gap

in the development of tools and techniques for

analysis part of the Education system in the State of

Kuwait. Furthermore, there is a need for more

evidence to study the impact of education on earning.

Based on the aim of this paper we generate these

questions:

 What we mean by the rate of return to

education?

 How rates of return are actually calculated in

practice?

 How rates of return might be useful for

policy-makers?

 How can we compare the RORV with RORF?

To tackle the above questions we crate three

objectives:

INTRODUCTION

The estimate of the return on investment in education

is of great importance for the strategic planning of

education and for decision makers in public and

private sector (Herrera, 2010; Gustman and

Steinmeier, 1981). Education has values for both social

(public) and private (individual) economists

traditionally use the rate of return on education to

understand household decision, also to assist the

education policy maker in the planning stage. A

positive return encourages the household investment

in education because they may desire for return to

exceed the returns from alternative investment

(Sakellariou, 2003). In this paper we are focusing on

the private rate of return on education where the

available information relating to education return in

Kuwait is currently limited, and according to

Psacharopoulos and Patrinos (2004), for developing

countries more research on the benefits of schooling

To cite this paper: Alqattan H.A. (2020). Estimate private rate of return on technical vocation school and formal school: evidence from Kuwait. J. Educ. Manage.

Stud., 10(2): 22-29. DOI: https://dx.doi.org/10.51475/jems.2020.3

J. Educ. Manage. Stud., 10(2): 22-29, 2020

will facilitate a better understanding of the results of

 To review and examine the past research

efforts in the area of the rate of return models in

education

 To adopt a model with equation those

provides the uniqueness of Kuwait economy and offer

estimation for the RORV/RORF in Kuwait.

this paper. Since, the focus of this paper is on the

labor who’s graduated from Kuwait high school

(formal and technical vocation); this review has been

confined to Kuwaitis employees only.

Public education system in the State of Kuwait

offers a number of different tracks for the different

needs of young people (AL-essa et al., 2007 ). General

education begins with Kindergarten for 4 to 5 year

olds and progresses through Primary, Intermediate

and Secondary. General education is provided in

formal schools, Arabic private schools and schools of

Religious education. International private schools

offer courses based on the curriculum of their

country. Other programs of education are available in

schools of special needs education, Such as adult and

literacy education. Technical vocation training is

offered in PAAET (Public Authority of Applied

Education and Training) and Tertiary education is

offered in Kuwait University, and the Institutes of

Arts and Music studies, the ministry of higher

education licensed new private higher education

universities such as the American University of

Kuwait, Gulf University for science and Technology

and Kuwait Maastricht Business School, etc. A map of

the secondary education opportunities available to

young people in Kuwait is shown in Figure 1.

 To provide policy makers and top

management with information needed for comparing

technical vocation secondary schools with formal

secondary school system in Kuwait.

This paper seeks to expand our knowledge in

two ways. First, account the private return benefits of

technical vocation and formal education using 2010

individual data for Kuwaitis. Second, the paper sheds

light on the impact of age and more experience on

technical vocation and formal earning. Kuwait

background presented in section 2; the modeling

approach that we chose to take an earning function;

where it is a briefly explain in section 3 and 4 together

with a detailed data description which are taken from

Kuwait Civil Service Commission; the result of the

RORE/RORV are presented in section 5; summery and

conclusions presented in section 6.

METHODOLOGY

Before we proceed further, let us briefly review

the Kuwait education system and labor market this

Secondary (since,

literature and

religions)

Kindergarten

Primary

Intermediate

Post-Secondary

Technical vocation

Figure 1. Track/Path of the education opportunities available to young people in Kuwait.

The data for this research is drawn from the

Kuwait Civil Service Commission database (Kuwait

Civil Service Commission database, 2010.). The Civil

Service Commission database comprises 43 ministries

and administrations, and covers about 95 percent of

all public sector employees. The Civil Service

Commission data has 12508 observations of

secondary formal school qualification employees and

195 observations of technical vocation school

qualification employees. We have used the data from

the year 2010 for this research, which is the most

recent data available.

In this study the researcher uses only four

variables, earnings, type of schooling, ages and years

of experience. We select the dependent variable is the

log of monthly the basic earnings because it is a

significant part of the total earnings as well as to

ignore any argument could be made in favor of using

just basic salary as the dependent variable rather than

total earnings A.1 Appendix shows the government

pay scales, Three independent variables are used in

this study, namely; formal/technical vocation

education, years of experience and ages. These have

been taken directly from the database without any

Alqattan, 2020

adjustment. The mean, median, maximum, minimum,

formal/technical vocation Schools; following the

approach of Mincer (1974) and Psacharopoulgos and

Layard (1979), Psacharopoulos and Patrinos (2004).

standard deviation and other statistical variables for

the sample data of formal/technical vocation

schooling basic earnings, ages and years of experience

are reported in Tables 1 and 2.

Table 1. Statistics of Kuwaitis employee hold

secondary formal schooling qualification

Items

Age

Basic Salary

Experience

Model

The human capital model of Becker (1962) and

Mincer (1974) has been the method used for the study

present in this paper. Human capital theory views

education as an investment decision. The earning

functions have been well applied on individual

countries’ data, with the semi logarithm specification

being very robust in empirical studies. Figure 2 briefly

review and explain the earnings model or (Mincerian

model).

Mean

Median

38.2

7.6

0.1

2.7

79.0065

249.2

216

1650

110

105.2

1.9

16.1

12.1

8.3

0.4

2.3

610.012

Maximum

Minimum

Std. Dev.

Skewness

Kurtosis

Jarque-Bera

97029.04

Probability

Sum

Sum Sq. Dev.

Observations

477642

720721

12508

3117104

1.39E+08

12508

151306

857852.9

12508

Mincer (1974) used the first human capital model

which was basically focused on the earning function

LnW_i   ₁F_i ₂V_i ₁A_i ₁E_i ₂E_i _i.......... .(eq.1)

Table 2. Statistics of Kuwaitis employee hold technical

as shown in eq.1

vocation schooling qualification

Where:

Age

Basic Salary

Experience

Ln W: is the natural Log for wage (basic salary in

our case).

Mean

32.3

262.4

240

10.3

F: is the formal schooling.

V: is the technical vocational schooling.

E: is the experience years.

A: is the Age.

Median

Maximum

Minimum

Std. Dev.

Skewness

Kurtosis

520

135

7.3

68.3

1.2

7.0

that have impact on earning but were excluded from

model.

We realized here that β₁is the coefficient for the

formal schooling and β₂is the coefficient for the

technical vocation schooling which is the estimated

returns.

Subsequent to the above regression and to estimate

the proportion of the variance in earnings that is

attributable to human capital, we regressed separate

regressions of earnings on schooling for various

graduation groups get their qualification from Kuwait

1.6

1.3

5.9

4.4

5.3

Jarque-Bera

Probability

Sum

154.8

59.0

97.2

6289

10462.7

195

51162

904509.4

195

1999

9600.7

195

Sum Sq. Dev.

Observations

Years of

Experience

Error or disturbance term

representing other forces which

may not be explicitly measure

Earnings

(basic salary)

Ages

Formal or

Technical

Figure 2. Illustrate of the Earning model (Source: Author’s findings)

J. Educ. Manage. Stud., 10(2): 22-29, 2020

Table 4. The formal school regression model

estimation

RESULTS AND DISCUSSION

Appling the regression model (eq.1) for the all data

using least square method by Eviews package. The

resulted estimated regression model is as follows:

t-Statistic

Prob.

Variable

Coefficient Std. Error

4.7

0.0086

0.00025

0.00056

547.43 0.0000

22.15 0.0000

90.966 0.0000

-23.35 0.0000

0.0056

0.051

Estimation Equation:

LOG(B) = C(1)*F + C(2)*V + C(3)*A + C(4)*E + C(5)*E^2

E^2

-0.00045 1.91 E-05

The average regression for eq.1 estimation

reported in table 3 a negative sign for the square term

which proofs the impact of over experience. The rate

of return to formal schooling 4.7 percent and the rate

of return to technical vocation schooling 4.9 percent

corresponding t-value and R²are highly significant.

R-squared

Adjusted R-

squared

S.E. of regression

Sum squared resid 300.083

Log likelihood

F-statistic

Prob (F-statistic) 0.000000

0.84

0.155

Mean dependent var 5.44

S.D. dependent var 0.39

Akaike info criterion -0.89

Schwarz criterion -0.89

5579.75 Hannan-Quinn criter. -0.89

21721.73 Durbin-Watson stat 1.44

Substituted Coefficients:

LOG(B) = 4.7*G + 4.9*V + 0.0055*A + 0.051*E - 0.00045*E^2

Source: Author’s

Table 4 shows the estimation of formal school

regression model for 12508 employees the

corresponding t-value and R²are highly significant.

Table 5. The technical vocation school regression

model estimation

t-Statistic

Variable

Coefficient Std. Error

Prob.

Substituted Coefficients:

LOG(B) = 4.7 + 0.0056*A + 0.0511*E - 0.00044*E^2

(eq.2)

5.11

0.07

76.31

0.0000

0.0023

0.041

0.003

0.004

0.84

0.40

11.44

0.0000

Table 5 shows the estimation of formal school

E^2

-0.00043

0.000102

-4.26

0.0000

regression

model

for

195

employees

the

corresponding t-value and R²are highly significant.

R-squared

0.805

Mean dependent var

S.D. dependent var

Akaike info criterion

Schwarz criterion

5.54

0.244

-1.59

-1.52

-1.56

1.91

Adjusted R-squared 0.801693

S.E. of regression

Sum squared resid

Log likelihood

0.11

2.23

Substituted Coefficients:

LOG(B) = 5.11 + 0.0023*A + 0.041*E - 0.00043*E^2

(eq.3)

159.17

Hannan-Quinn criter.

Durbin-Watson stat

F-statistic

262.43

0.000000

Table 3. The average regression model estimation

Prob (F-statistic)

Source: Author’s

Variable

Coefficient Std. Error t-Statistic

Prob.

Based on the above tables we can conclude that:

- The rate of return on formal secondary

schooling 4.7 percent.

- The rate of return on technical vocation

secondary schooling 4.9 percent; corresponding

- A negative sign for the square term which

proofs the impact of over experience.

4.7

0.0085

551.16

0.0000

4.9

0.013

369.60 0.0000

0.0055

0.051

0.00025

0.00056

21.81

91.86

0.0000

- The Age of individual is not significantly

affecting the wages\earnings.

E^2

-0.000448

1.89E-05

-23.77

0.0000

*t-value and R²are highly significant.

R-squared

0.84

Mean dependent var

S.D. dependent var

Akaike info criterion

Schwarz criterion

5.44

0.38

These empirical findings raise several important

questions. The results indicate that significant rates

of return on both education systems in Kuwait are

positive and technical vocation slightly higher than

formal, In addition, coefficient of Age insignificant.

Also, there are several possible explanations for this

finding. First, the government pay scales are

determined largely on the basis of the number of

Adjusted R-squared

S.E. of regression

Sum squared resid

Log likelihood

0.155

303.85

5685.73

1.44

-0.89

Hannan-Quinn criter.

Durbin-Watson stat

Source: Author’s

Alqattan, 2020

years of schooling with little consideration to the area

of specialization. Second, the average education of

women in Kuwait is higher than that of men.

There are number of future research direction

could be studied for instance, the influence of

education in the choice of sectors and other decisions

taken after school should be taken into account when

one studies the full benefits brought by education to

an individual, the effect of selecting secondary level

track on higher education and the influences of

technical vocation education on labor market.

CONCLUSION

Education is one of the many investment decisions

motivated by the fact that the investment yields a

choice that one would not otherwise have. Part of the

return to the investment is to be found in the set of

options that emerges. For instance, when an

individual decides upon the education track to be

attained, it is believed that such academic

qualification will lead to a better-paid job. That

qualification will also extend the number of options in

other matters, as well, such as the sector and/or

specific firm where the individual will be employed.

Part of the individual’s return to education will thus

be the return to subsequent choices that are available

only after qualification is obtained.

Acknowledgements

The author grateful to the editor of this

conference, and would like to thank Dr. Bachir Talibi

for this helpful comments and assistance. The author

is responsible for remaining errors.

REFERENCES

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Based on the findings of this paper the researcher

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match between skills acquired in school and the

industry will expected to accelerate the school-to-

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Steinmeier, 1981, Meyer and Wise, 1982, Neuman and

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consideration to the area of specialization.

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estimates of the returns for the two track of

secondary level education system in Kuwait and

demonstrate the impact of more experience and ages

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Alqattan, 2020

APPENDIX

Table of grades, salaries and social allowance categories (Kuwaiti / non-Kuwaiti)

Repres-

entation

allowance

Minimum

stay

in class

Children

Allowance

for

Cost of living

Social Allowance

Leaders

award

Monthly salary (basic)

And increments

Class / Group

Minister

Non-

Kuwaiti

Non-

Kuwaiti

Last

bound

Bid increment

The number

of increments

First bound

1650

Kuwaitis

Married Married Single

660

1650

Group

leadership positions

231

204

174

120

448

425

400

1500

1000

670

690

780

680

790

700

600

Excellent

degree

Five bonuses

Undersecretary

of the Ministry

Assistant Deputy

Minister

Fifty K.D.

Monthly

Up to (7)

Children

only

Four

years

Formal Group

Grade (A)

368

353

328

315

219

278

250

242

222

219

268

253

235

222

203

190

169

161

580

520

460

410

360

310

240

200

165

135

520

460

410

360

310

260

200

165

135

110

Grade (B)

58.5

First Grade

Second Grade

Third Grade

Fourth Grade

Fifth Grade

Sixth Grade

Seventh Grade

Eighth Grade

Five bonuses

120

Two

years

147

141

Group Professional

assistance

282

255

189

167

295

225

Ten bonuses

Five bonuses

225

First Grade

Five

years

Second Grade

120

135

230

215

211

154

149

140

136

165

140

120

105

140

120

105

Third Grade

Fourth Grade

Fifth Grade

Two

years

Sixth Grade

Group Assistant jobs

First Grade

ــــــــ

253

230

211

165

149

136

210

160

120

Ten bonuses

160

120

Five

years

Second Grade

Third Grade

120