Human Capital Investment and Employment in Iran: The Importance of Urban-Rural Distinctions

This thesis explores factors related to private investment in education in Iran. All of the three empirical chapters pay particular attention to the very different findings obtained when considering urban versus rural contexts and the implications this has for gender in Iran. For the first two empirical chapters, we use data from the Household Expenditures and Income Survey (HEIS), while for the last chapter, we employ data from the Labour Force Survey (LFS).

Household/parental educational expenditure on children is one factor related to private investment in education. We study determinants of household/parental educational expenditure on children, and results in this chapter indicate two interesting findings; firstly, richer parents, especially in urban areas, spend more money on their children's education, which suggest possible existence of intergenerational mobility. Secondly, in rural areas maternal education is not significantly related to determining the decision to spend on education, the amount spent, and the proportion of household expenditure allocated, which suggest possible existence of gender discrimination in rural areas. Chapter 5 explores both naïve and causal returns to education in terms of wages by using both OLS and Instrumental Variable techniques. Our OLS results provide strong evidence for non-linearity, and higher returns to schooling for women, and suggest that returns to education are similar between urban and rural areas. Our IV estimates are higher than OLS estimates, and imply that returns to education are higher for urban than rural areas, and for women than men. Finally, we examine job mismatch in the Iranian labour market in Chapter 6; particularly determinants of under/over employment. Most of our findings are consistent with the existing studies of under/over employment. However, notably we find that marriage and education have different implications for men and women, and more educated women suffer from higher underemployment, while the opposite is true for men. We also find that single and divorced women are suffering from high underemployment, while marriage is not significantly related to men’s probability of job-mismatch.

Overall, studying various factors related to private investment in human capital in Iran suggests the possible existence of increasing intergenerational mobility, but also discrimination, against women within the Iranian labour market.