Exploring the Role of Education on the Labor Productivity in Iran

Authors

1 Associate professor, Faculty of Economics, Management and Business, University of Tabriz

2 Associate professor, Faculty of Economics, Management and Business

3 PhD student of economics, College of Economics, Business and Management, University of Tabriz

Abstract

There is no consensus on the way that education can affect the labor productivity. Three different hypotheses have been proposed to explain the role of education on the productivity. The first one is called the human capital theory, which indicates that education increases the labor productivity. The second hypothesis is so called the strong screening hypothesis, which considers education just as an instrument to signal the hidden productivity of the labor to employers. And finally, the last one is called the weak version of the screening hypothesis. This hypothesis states that the main role of education is to signal, however, it can contribute to increase the labor productivity as well. To shed more light on the validity of the above mentioned hypotheses, this paper examines the role of education on the labor productivity in Iran. To that end, the data from the Households Income and Expenditure Survey (HIES) for the year 2009 of Iran has been used. The results show that some education-levels act as a signal only and they do not affect the productivity.

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