The Effect of Conflict on Rate of Return to Education: Case of Timor-Leste

• In Event: Governance and integration of education with broader process of peacebuilding

Proposal

The main purpose of this research is to examine the causal impact of education on the wage for workers in Timor-Leste by taking into account for endogeneity and sample selection issues in conflict affected situation.
Violent conflict is one of the most important development challenges facing the world today.
The issue of education has become one of the most important subjects in conflict-affected countries. In order to improve the policies and the efficiency of interventions, an emerging body of related researchers have been conducted on the impact of violent conflicts on children education outcomes and functioning of education.
However, there is currently limited knowledge about the practitioners of education in post-conflict countries, and even less about the economic incentives for household and individual investment in education in countries experienced violent conflict. This study contributes to a better understanding of the processes that drive education demand and analyses the rate of return to education in Timor-Leste, the country that experienced 25 years of conflict by Indonesia.
This research thus estimates the rate of return to education and confirms whether or not there is a substantial difference in rate of return to education between conflict affected districts.
The significance of this study lies in enriching evidence on rate of return to education in conflict affected contexts. Accumulating the evidence will contribute to pushing for expansions of education. This study can provide guidance to the Timorese households to make a better decision about private education expenditures and also provide policy recommendation to the Timorese government related to educational system and labor market in Timor-Leste.
Education and sector are endogenous variables in the analysis of return to education in conflict experienced countries. However, it is difficult to control for endogenous variable. Most previous studies actually controlled for only the sector variables.
The most popular way to control for the endogeneity of education is the instrumental variabels (IV) approach, while the Heckman two step selection model is often used to control for the endogeneity. In our research, we employ “conflict” as an instrumental variable to control for endogeneity of education.
Our research uses two datasets. First one is the Timor-Leste Labor Force Survey 2010. This dataset includes 4,665 households was interviewed, with 252,000 people surveyed, from all districts of Timor-Leste. In order to identify individuals and households affected by the conflict, we make use of data on events and violations contained in the Human Rights Violations Database (HRVD).
According to the regression, result will show that the conflict in Timor-Leste induced a reduction in the returns to education while creating a scarcity of qualified human resources.
The paper will also conclude that the challenges to the promotion of higher investment in education a post-conflict country happen not only because of the conflict which people experience but also because of the post conflict economic settings.

Author

• Takao Okamoto, Kobe University