The effect of schooling, experiences, and firm size on earnings in Sri Lanka (Incorporated with the major emphasis of Mincer’s Earnings Function)

W.A. Senathissa
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W.A. Senathissa: Senior Lecturer, Department of Economics and Statistics, Sabaragamuwa University of Sri Lanka

International Journal of Research and Innovation in Social Science, 2023, vol. 7, issue 6, 561-575

Abstract: This paper attempts to identify the effect of education, experiences and firm size on earnings in Sri Lanka incorporated with empirical emphasis of the Mincer’s Earning Function. Since distinguished findings are reported pertaining to the log earning profile of education and experiences in literature, this study attempts to investigate, which kind of log earning profile is associated with education and experiences in Sri Lanka by adding a new variable “Firm Size†to the conventional Mincer’s earning function. For this purpose, direct personal interviews with structured questionnaire survey were conducted to collect cross sectional data from 115 employees who are employing at firms in different sizes in Maspotha Divisional Secretariat Division of Kurunegala District. OLS Multiple regression analysis and Curvilinear regression techniques were employed as the major data analysis tools of the study. Results revealed by the study show that log-earning is a linear function of education (R2=34.5%) and a quadratic function of experiences (R2= 35.8%). Rate of returns to education (7.4%) was higher than the rate of returns to experiences (2.7%) which implies that the log-earning profile in the area is education oriented. Medium scale enterprises (20.1%) were identified as the most influential firm type on earnings. Overall, it shows that the firm size has a positive effect on earnings in the area. Homogeneous preferences on education stimulated by the provision of free education were identified as the reason for linearity of education while deterioration of skills with declining physical and mental effort with growing age were reasons for the concavity behaviour of experiences. Further investment on education, taking wage policies of firms into consideration and forecasting future expectation of firms in the job market will lead to increase rate of return on the investment of education and experiences.

Date: 2023
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