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MA Educational Planning, Economics and International Development

Dissertation Unit

The Mincer Wage Equation and the Informal Sector: Estimating Rates of Return to Education in Keralas fishing communities

Date Submitted Word Count

03/09/2013 19,931

Joseph Collins

Abstract

This dissertation estimates the rate of return to education for informal workers in Kerala. In May 2013 ninety-two active fishermen were included in a survey covering three villages in the Thiruvananthapuram district. The results show that fishermen in the sample face incentives to invest only in the initial five years of school, after which returns are negative.

An augmented model of the Mincer equation is offered which controls for exogenous variables seen to influence earnings for informal workers. The augmented specification greatly improves the explanatory power of the model and reduces the returns to education at all levels.

The research suggests that an appropriately augmented Mincer equation remains a parsimonious method for calculating the rate of return to education in the informal sector but has extensive data requirements prohibiting national estimates.

Contents Abstract Contents Abbreviations List of tables and figures Acknowledgements Introduction Background Research focus Aim and objectives Literature Review Theoretical framework Data analysis framework Recent trends The informal sector Context Methodology Research strategy Sampling and coverage Data collection Data analysis Ethics Issues and limitations Findings Qualitative stage Survey: descriptive statistics Simple Mincer equation Variables Preferred specification Rate of return Average effects Testing assumptions Estimation issues Discussion Rate of return Other studies Implications for local policy Implications for theory Methodology: issues and imitations Future work Conclusion References Appendices 2 3 4 5 6 7

13

29

48

69

83 85 91

Abbreviations

ESCAP HCT KFDWC ICLS MATSYAFED RORE SES SMEs SRS VESS

Economic and Social Commission for Asia and the Pacific Human capital theory Kaikkara Fishermen Development Welfare Co-Operative Society International Conference of Labour Statisticians Kerala State Co-operative Federation for Fisheries Development Ltd Rate of return to education Sequential exploratory strategy Small to medium enterprises Simple random sampling Venad Education & Social Services

Figures and Tables

Name
Figure 2.1 Figure 3.1 Table 3.1 Photo 1 Table 4.1 Table 4.2 Figure 4.1 Figure 4.2 Figure 4.3 Figure 4.4 Table 4.3 Table 4.4 Figure 4.5 Figure 4.6 Table 4.5 Table 4.6 Figure 4.7 Table 4.7 Figure 4.8 Table 4.8 Photo 2 Table 5.1 Table 5.2 Table A1 Table A7 Table A8 Table A9

Heterogeneity of returns to education in the UK The Iterative Research Strategy Summary of Interviews Typical crew repairing nets in Mampilly Matrix of interview responses Summary statistics by village Distribution of schooling Earnings distribution Relationship between earnings and schooling Age-earning profiles Alternative post-stratification weighting Per year rate of return to education: alternative specifications Educational returns by level Rates of return: simple and preferred models Owner education, boat average and village average Variables with and without education Hourly and daily earnings distributions Rates of return: true and assumed experience Rates of return to ownership Testing for endogeneity: measures of association Open public market in Mampilly Private rates of return from studies in India Informal determinant coefficients The positivism-constructivism paradigm Summary statistics for dataset Introducing variables to the simple Mincer equation Preferred specification

Acknowledgments

I would like to thank my supervisor Victoria Turrent for the guidance and help offered throughout this dissertation. Her patience with the researcher and enthusiasm for this research are greatly appreciated. I would also like to thank Dr John Jerrim for his helpful input throughout the data analysis process and particularly his early encouragement.

This dissertation would have proven impossible without the extraordinary patience and goodwill shown by Leningeorge Alfonse of KFDWC throughout my time in India and during the preparation for my research. Finally without the support and encouragement of the Bid I would have been unable to undertake this research.

Introduction
Contents: 1.1 1.2 1.3 Background Research Focus Research Aim and Questions

1.1

Background

Since the works of Becker (19931), Shultz (1971) and Mincer (1974) human capital theory has played a significant role in educational, economic and developmental policy and planning worldwide (Le, Gibson and Oxley 2005). Human capital theory which forms the theoretical framework of this research posits education as a capital good, and equates education spending with investment: human capital theorists argue that the skills and knowledge of a workforce (or human capital) are fundamental to its productive capacity; furthermore these skills can be enhanced through formal education and such investments have as high or higher returns than traditional physical capital investments (Onaliyan and Okemakinde 2008).

Globally much effort has been devoted to measuring the productivity-enhancing effect of education, commonly known as the rate of return to education (Dickson and Harmon 2011). These estimates are used extensively by policy makers, yet traditionally rate of return to education (RORE) calculations have been made using wage data exclusively from individuals in formal employment. These estimates therefore give returns to education for wage-earners in the formal economy, yet fail to account for the large informal sectors of developing countries.

While estimating the size of the informal economy is difficult due to the nature of the enterprises and employees involved, Charmes (2012) suggests that in developing nations an estimated 58-70% of the non-agricultural population
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originally published 1964

works in the informal sector. The UN suggests [t]he problem of poverty cannot be solved without paying closer attention to the informal sector and its participants (ESCAP 2006: 1). Reports by DFID (McGrath, King, Leach and CarrHill 1994) and the ILO (Palmer 2008) emphasise the potentially vital role played by education in the sector. Therefore understanding the productivity-enhancing and poverty-reducing role of education for informal workers is a matter of great importance for development planners focused on education.

Despite the size of the informal sector estimation of RORE for informal workers continues to be ignored in national and international returns to education. This research is motivated by an interest in whether existing RORE studies might misconstrue the benefits of education to informal workers and -if this is the case- the potential implication for education planning based on formal-only estimates.

1.2

Research focus

A number of strong assumptions underpin human capital theory (HCT); most significant for this paper is the fundamental assumption that education creates or develops human capital by equipping educated individuals with productivityenhancing skills and knowledge (Becker 1993). This increased productivity is directly responsible for the wage-premium seen worldwide for higher-educated individuals (see Psacharopoulos and Patrinos 2004) and justifies both private and public investment in education. Privately a rational individual will invest in education to become more productive and thus secure higher future earnings, as long as the marginal benefit exceeds the marginal cost (Harmon, Oosterbeek and Walker 2003). Equally, as long as the social return is greater than the cost, a society should invest in education for its populace to ensure a more productive workforce and thus future growth (Romer 1994).

While dominant in mainstream education economics HCT has not been without its criticisms both ideological and practical. One criticism involves attacks on the

supposed isolation of human capital from society and social issues; the perceived uniformity in acquisition and use of skills (Green 2011). Even if the link between education and productivity is accepted the link between productivity and earnings is not straightforward. This paper is particularly concerned with the concept of the use of skills as being determined' (Green 2011): in existing RORE literature this focuses on issues of race, caste and gender; issues which the researcher terms 'social determinants'. The intention of this research is to explore which other factors within the informal sector influence an individual's ability to exploit their human capital, factors which the researcher shall denominate 'informal determinants'. One intended contribution of this paper will be to explore the significance of a number of factors highlighted in literature emerging from a strand of economics not currently aligned with education economics; the economics of informal economies.

Despite the size and importance of the informal sector on the economic and demographic picture of many nations, informal RORE calculations remain in their infancy and are underrepresented in the literature. The highly influential series Returns to investment in education by the World Bank (Psacharopoulos 1994; Psacharopoulos and Patrinos 2004) is based on studies of the formal, waged sectors of economies. While a small number of studies have attempted to estimate earnings in the informal sector (Aslam et al 2012; Dutta 2006 differentiated between causal and wage earners) the vast majority of studies past and present adopt the perspective of Duraisamy (2002:610) that it is simply too "hard to separate the income from self-employment by the contribution due to physical capital, human capital and the reward for risk and uncertainty bearing", or fail to acknowledge the shortcoming at all.

This dissertation follows Aslam et al (2012: 95) in arguing that despite the difficulties of calculating informal RORE: "a more disaggregated analysis is important: wage employment represents a small and sometimes shrinking part of the labour market in developing countries, and the extent to which education plays a productivity-enhancing and poverty-reducing role in the expanding sectors of the labour market

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needs to be addressed." A UN report into the informal sector stresses the importance of education, yet also emphasises factors such as access to credit and physical infrastructure as fundamental to productivity and poverty-alleviation (ESCAP 2006).

Other literature on informal enterprises suggests that for workers in the informal sector the ability to exploit productivity enhancing skills and knowledge is dependent on localised factors such as technology and local trading conditions. A major focus of this dissertation will thus be to explore which factors -not previously considered in standard RORE calculations- are seen to impact earnings in the informal sector.

According to Bjorlund and Kjellstrom (2002) the Mincer equation has been the most widespread and influential methodology used by education economists to estimate RORE. The Mincer equation traditionally relates wages to schooling and experience (Mincer 1974). This research principally explores the use of an augmented Mincer equation for use in the informal sector which includes the factors suggested in the previous paragraph.

In India, the world's second largest domestic workforce, 90% of the working population are in informal employment (NSC 2012). As a developing nation with an expanding informal sector combined with high levels of illiteracy2 the need to understand the impact of education on non-wage earners is particularly relevant in India. This paper will focus on fishermen working in the coastal villages of Kerala state, in southern India. The fishing industry in Kerala sustains over one million people and is dominated by small informal enterprises (Directorate of Fisheries 2011). While work as early as Jamison and Lau (1982) looked at the returns to farmer education less is known about the fishing sector, therefore this dissertation aims to extend research to workers in a previously neglected sector.

37% of the worlds illiterate adults (UNESCO 2012: 92)

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1.3

Research aim and objectives

The overall aim of this paper is to explore how appropriate the Mincer wage equation is as a methodology for calculating RORE in the informal sector. To achieve this it is necessary to first consider which factors not included in traditional Mincer equation are influential in determining productivity in informal enterprises, before attempting to calculate returns using an appropriately augmented Mincer model. Specifically this project has three questions conceived to help achieve the overall aim:

1-

which factors are key determinants of productivity in the informal sector, with particular emphasis on fishermen in Kerala?

2-

what is the private rate of return to education for fishermen in Kerala?

3-

what difficulties arise in calculating rates of return for informal workers and what are important considerations for future research?

In order to answer question one a literature review will identify potential variables highlighted in RORE and informal sector literature, after which a set of interviews will be conducted amongst local stakeholders. Using the results of these two stages a survey will be designed and conducted amongst fishermen in selected villages in Kerala. Using the data collected an augmented Mincer equation will be estimated in the STATA computer programme to answer question two. Answering question three will be a reflective process in which the research project itself is assessed as a pilot study for future research in the area of informal rate of return calculations.

This dissertation seeks to combine two strands of economic theory that have hitherto been kept largely separate: literature pertaining to productivity in the informal sector, and rate of return studies seeking to quantify the productivityenhancing effects of education. While specific RORE estimates will be given for fishermen in the villages studied the intended contribution of this dissertation is to provide an augmented Mincer model sensitive to informal wage determinants; to

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expand existing understanding of how best to estimate returns to education in the informal sector; and to test the viability of the Mincer model as the preferred econometric method for informal RORE.

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Literature Review
Contents: 2.1 2.2 2.3 2.4 2.5 2.6 2.7 Introduction Theoretical framework Data analysis framework Recent trends The informal sector Context Summary

2.1

Introduction

This chapter examines the issues involved in calculating the rate of return to education amongst informal workers, making a significant contribution to an important yet largely ignored area of labour and education economics. The first section establishes the theoretical framework of HCT as it has evolved over the past half century. Section 2.3 gives a critical review of the data analysis method and the limitations of the approach when considering informal workers. Sections 2.4-2.5 seek to directly answer research question one:

1-

which factors are key determinants of productivity in the informal sector, with particular emphasis on fishermen in Kerala?

Section 2.4 discusses the recent trends and debates in the RORE literature; Section 2.5 focuses on the informal labour market, identifying key determinants of earnings for informal workers. By combining research from two previously disparate strands of economics this research intends to identify a number of earnings determinants that are necessary for any informal RORE calculations. The final section of this chapter focuses on the specific context of the research group.

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2.2

Theoretical framework

Human capital theory as a model of development focuses on the productive capacity of human manpower in the development process (Fagerlind and Saha 1997: 18). Neoclassical growth models held labour as constant and homogenous in the aggregate production function, with growth emerging from exploiting physical capital and land (Romer 1994). Schultz however suggests that human capital is a major explanatory factor in the difference between growth from traditional forms of capital, and total economic growth (1971: 24). This unexplained residual in traditional growth accounting models has led many economists to argue that human capital plays a key role in the economic prosperity of an individual and nation (Psacharopoulos and Woodall 1985; Romer 1994; McMahon 2002).

Human capital is highly heterogeneous and includes a variety of resources embodied in man that have the economic property of rendering future services of some value (Schultz 1971: 48). Better health, training, migration and particularly schooling increase an individuals earning potential and quality of life. While it differs from traditional conceptions of capital as it cannot be separated from the owner, human capital is both an investment and a quantifiable commodity (Becker 1993: 15).

Education as investment

The fundamental tenet of HCT in relation to education is that schooling raises earnings and productivity mainly by providing knowledge, skills, and a way of analyzing problems. (Becker 1993: 19) Working from an idealised market in which individuals are paid their marginal product Becker (1993) asserts that education increases an individual's productivity, and as a result we observe a wage premium. In this way schooling is viewed as one of the major channels through which both individuals and nations increase their economic wellbeing: In short, the human capital theorists argue that an educated populace is a productive populace (Onaliyan and Okemakinde 2008: 479). HCT has therefore provided strong

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justification for public investment in education in developing nations as a means for reducing the burden of poverty (Fagerlind and Saha 1997).

The conceptual framework of education as an investment emphasises the importance of financial returns to education: rational actors will invest privately in education until the marginal cost of an additional year of education equals the marginal benefit (or wage premium) for attaining that additional year (Hartog 2000).

Criticism

Practically it has proven difficult to accurately quantify the productive value of education. On the macroeconomic level this has led to conflicting evidence of the role played by education (Psacharopoulos and Woodall 1985; Onaliyan and Okemakinde 2008). The perceived failure of human capital investment to alleviate poverty has led many to question whether or to what extent education [is] directly related to improvements in occupation or income (Fagerlind and Saha 1997). Furthermore, a number of critics have focused on the assumption of causality that human capital theorists apply to the correlation between education and earnings (Jamil 2004).

At a more theoretical level Bowles and Gintis (1975) criticise the objectification of man as an economic commodity, seeing HCT as the ultimate expression of capitalist development theory in which education becomes a key method of perpetuating class divisions and justifying class inequalities. Others have criticised HCT for its purely instrumental view of education, arguing that it can also have intrinsic value (Robeyns 2006). Many alternative economic schools argue HCT cannot satisfactorily deal with issues of culture, gender [and] history (Robeyns 2006: 72). Even some economists who agree education is an investment have questioned the supposed isolation of human capital from social context: Green suggests, the acquisition, valuation and utilisation of skill are each socially determined (2011: 7).

Despite the criticisms of HCT it remains at the forefront of much education planning

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and is the framework on which rates of return calculations are based. As the focus of this dissertation is the applicability of such measurements in the informal sector this research will similarly be underpinned by the human capital notion of education.

2.3

Data analysis framework

The rate of return to education is a measure of the financial return received for additional education. At its simplest level it involves subtracting the costs incurred in educating oneself from the benefit enjoyed as a result of that education. HCT predicts that if the marginal benefit from each additional year of education in equation 1 is greater than zero an individual will invest in their education (Hartog 2000). Given the importance of education to national growth suggested above it is unsurprising that governments and planning bodies have become very interested in the return to education. Particularly significant is the return to education relative to other investments such as savings or physical capital (Carnoy 1994).

Cost Benefit

(Equation 1)

Ideally Equation 1 would take into consideration all costs and benefits of each year of additional education, however such a full or elaborate method has significant data requirements (Jamil 2004). The full method requires detailed information on all costs born in securing education, from direct costs like tuition to indirect costs such as foregone earnings, as well as psychological costs such as the dislike of school. Such data is rarely if ever available and economists have adopted a simplified specification that instead approximates cost and benefit, commonly known as the Mincer earnings function (Bjrklund and Kjellstrm 2002).

Calculating the RORE involves two stages: firstly the wage premium or schooling coefficient must be calculated using the Mincer wage equation, after which this coefficient can be used to calculate the internal rate of return (IRR) to education.

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The Mincer wage equation

The Mincer equation derives the return to education using the more readily observable wage premium for each additional year of schooling and the opportunity costs for that year (foregone earnings). The most widely used Mincer specification is a semi-logarithmic regression modelling earnings as a function of schooling and experience (Lemiuex 2006).
ln W S E E 2

(Equation 2)

The standard Mincer equation relates the natural logarithm of wages (W) to years of schooling (S), years of work experience (E) and years of work experience squared (E); an equation that produces a schooling coefficient (.S). It is this schooling coefficient that is seen to reflect the wage premium for each additional year of school (Bjrklund and Kjellstrm 2002: 195).

The natural logarithm of wages is used as the interest of economists is the relative earnings differential caused by schooling, not the absolute values (Mincer 1974: 130.) Furthermore, log earnings allow comparisons of the relative returns of education to an individuals discount rate and alternative forms of investment (Lemiuex 2006: 4). Schooling3 is usually entered into the model either as a continuous variable (years of schooling) or as a categorical variable (highest level of education) (Duraisamy 2002). Due to potential non-linearity4 in returns to education recent work has emphasised the categorical variable as the preferred entry method (Lemieux 2006; Dutta 2006). The ability to understand returns to education by different levels is important both to
3

Formal schooling provided by the state is the norm for the sample universe. Therefore this paper follows comparable surveys in India (Duraisamy 2002; Dutta 2006) in measuring education as formal schooling. 4 The continuous variable assumes one year of education is of equal value whether it is in primary school or university.

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understanding the investment decisions taken by individuals, and for potential fund allocation by the state (Harmon et al 2003).

Experience-earnings profiles are included to capture both the variation in earnings associated with age and the post-schooling investment in human capital. Mincer suggested that the concave shape of the profile5 reflects the diminishing returns to investment in human capital: opportunity costs increase while years of increased earnings decrease (1974: 14.)

The augmented Mincer equation

ln W S E E 2 X

(Equation 3)

Recent studies have tended to favour an augmented Mincer specification (Equation 3) in which a number of exogenous wage determinants (X) are included (factors seen to affect wages that are independent of both schooling and experience). The inclusion of these variables recognises the argument of Green cited previously that the use of human capital is socially determined. The social determinants included vary by study, but according to Dutta (2006: 433) [t]here is considerab le empirical evidence that these factors influence the wage determination process. Duraisamy (2002) and Aslam et al (2012) find evidence that location is a significant determinants of wages; Aslam et al (2012) show the significance of caste, religion and parents occupation on earnings in India as well as highlighting the significant role played by gender (as do Kingdon and Unni (2001) and Duraisamy (2002)).

Dutta (2006: 436) demonstrates that an augmented model for India greatly improves the explanatory power of the model. She finds that for casual wage earners the private returns to education using the augmented model are significantly lower than those using the standard Mincer equation (returns to completing primary school drop from 5.15% to 1.93%) This strongly indicates that the simple Mincer
5

Captured by introducing the squared term - E (Duraisamy 2002: 613)

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model is capturing the impact of other factors on wages (omitted variable bias).

Criticisms

Like much RORE literature this research is limited to calculating private, monetary rates of return to education. The Mincer equation provides estimates using only readily available financial data and excludes private non-market benefits such as better personal health, improved marital sorting and greater enjoyment of other activities, such as music and literature (Haveman and Wolfe 1984). Bennell (1996) finds that social monetary returns to education are than individual returns. Haveman and Wolfe (1984) have suggested that non-market positive externalities (the benefits to society of an educated populace) are numerous and include better health, lower crime rates and improved social cohesion. Private estimates will thus underestimate the true value of education to society and the individual (McMahon 2002).

The screening hypothesis offers an alternative interpretation of the positive correlation seen in the literature between education and earnings, contesting that education acts as a signal of natural ability to employers, and thus the higher earnings seen for the more educated do not reflect returns to productivity gains due to human capital formation, rather a form of credentialism in a market with imperfect information (Riley 1979). The potential for screening and credentialism has strong implications for the role of education in the informal sector: typified by small enterprises, often with low-skilled workers the informal sector is unlikely to use education for screening. The poverty-alleviating role of education for informal workers is therefore directly tied to the supposed productivity-enhancing role ascribed by Becker and Schultz.

Calculating the internal rate of return

Equation 4 is an approximation to Equation 1 in which the return is calculated as the benefit over cost. In this approximation the return is calculated as the marginal benefit -- from i years of schooling above i- 1 (i.e. the value of an additional year of

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schooling above the previous level). This provides the schooling coefficient, which can be considered the internal rate of return (IRR) or discount rate.

( i i 1) (Yi Yi 1)

(Equation 4)

Bjrklund and Kjellstrm note, it is often taken for granted that the schooling coefficient can be interpreted as the internal rate of return to the investment in schooling. However, this interpretation relies in a number of assumptions, all of which are seldom discussed in empirical studies (2002: 195).

The above calculation assumes that the only cost of education is foregone earnings. Direct costs such as tuition fees, books, and transport are excluded or offset by parttime work undertaken during schooling (Mincer 1974). Free education for all 6-14 year olds was introduced nationally in India on 1st April 2010 and therefore such an assumption may be seen to be reasonable approximation up to secondary school in India (MHRD 2012). However, Desai, Dubey, Vanneman, Banerji (2009: 13) suggest private school attendance in India may be as high as 32%, while a recent survey suggests that the majority of parents spend on average more than Rs 18 lakh-20 lakh [c.20,000- 22,000 GBP] in raising a child by the time their teen graduates from high school (Dhawan 2013).

The second assumption is that the earnings function captures the full benefit of the investment to education. As suggested previously the data requirements to estimate wider private benefits are beyond the resources of this research. Following comparable studies in India (Duraisamy 2002; Dutta 2006; Aslam et al 2012) this dissertation will provide lower-band estimates for the returns to education limited to financial returns as popularised by Mincer (1974) and widely adopted in the literature (see Psacharopoulos 2004).

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2.4

Recent trends

A number of highly influential studies stretching back to the 1970s have found that the returns to education are not only positive, but higher than alternative forms of investment such as savings or physical capital (Mincer 1974; Psacharopoulos and Woodhall 1985; Psacharopoulos 1994). The World Bank economist George Psacharopoulos has also consistently argued that investments to primary schooling yield the highest returns.

A number of studies have begun to find evidence of very different returns to education. Bennell (1996) suggests that Psacharopoulos (1994) greatly overestimates returns at all levels of education, inflating returns by up to one third. This finding of significantly reduced returns is confirmed by Newell and Reilly (1999) who find single-figure, rather than double-figure, returns in transitional economies. Recent Indian studies have suggested similarly reduced returns, especially at lower levels of schooling (see Dutta 2006 p442-3 for an excellent summary table).

The classic pattern of decreasing returns to education has also been challenged by a number of economists who find evidence of increasing returns to education by level (Bennell 1996; Glenwe 1996; Newell and Reilly 1999). This pattern has been identified by a number of studies in India (Duraisamy 2002; Dutta 2006; Aslam et al 2012) who find surprisingly low returns to primary education. While Psacharopoulos suggests average private returns to primary school in Asia are as high as 20% Dutta (2006) finds returns between 2.1- 3.3% for formal workers in India.

Heterogeneity

Harmon et al (2003) use quantile regression to disaggregate the returns to education for those at the top and bottom of the wage distribution in the UK. Figure 2.1 demonstrates the large variance in returns to education between wage bands found in their study.

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Figure 2.1

Heterogeneity of returns to education in the UK

Source: Harmon et al (2003: 129)

In existing studies for India low earning individuals in low-skilled informal employment are excluded from national estimates (e.g. Duraisamy 2002; Dutta 2006). It is the need to understand the heterogeneity in returns to education and the implications for the economic impact of education on the poorest informal workers that motivates this research.

A number of papers in India have begun to offer more disaggregated results, identifying different types of earners and providing alternative estimates. Dutta (2006) differentiates regular and casual wage earners (who form part of the informal sector in India), finding that regular wage earners have significantly higher returns to all levels of education. The return to completing primary school for regular workers in 1999 was 2.43% compared to just 1.13% for casual wage earners. Of particular significance is the finding that causal wage earners have no incentive to invest in education beyond primary school and indeed returns are negative for higher levels. Due to data limitations Duttas study is only able to account for male waged workers and thus is applicable to only around 15% of the population (based on World Bank figures (World Bank)).

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Aslam et al (2012) extend previous research by attempting to calculate RORE for the self-employed as well as wage workers. In an innovative study that relies on a custom survey the authors show that returns to those in agricultural self-employment (6.6%) is significantly lower than those in non-agricultural self-employment (9.7%). Returns to the non-farm self-employed are higher than that of wage employed (6.8%) suggesting a significant benefit to owning the means of production, a potential variable that will be included in this research.

As early as 1982 Jamison and Lau showed that productive returns to education in the farm industry are small, and seem to be highly dependent on the use of modern techniques such as fertilizer and machinery. In contrast Aslam et al (2012) find very large returns to education amongst India agricultural workers in areas surveyed that use modern inputs (109). This is in line with research on informal enterprises and implies that access to technology is potentially a significant determinant of wages for informal workers. Like Jamison and Lau (1982) Aslam et al also find that controlling for capital investment dramatically reduces the perceived returns to education amongst the farming self-employed. Technology and capital variables will accordingly be included as potential variables in this dissertation.

2.5

The Informal Sector

Definition

In defining the informal sector in 1993 the 15th International Conference of Labour Statisticians (ICLS) determined upon a focus on the nature of the enterprises involved, which have been broadly defined as:

"private unincorporated enterprises... i.e. enterprises that are owned by individuals or households that are not constituted as separate legal entities independently of their owners" (Hussmanns 2007).

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Informal employment includes all those who work in informal enterprises and all those who work informally within formal enterprises; those who lack contracts and who are not registered in labour or social security registers (ILO cited in Charmes 2012: 106). Charmes suggests that the informal economy can be used to refer to the amalgamation of these two concepts, the informal sector as comprised of enterprises and informal employment as comprised of individuals. Traditional fishermen6 in Kerala lack contracts and do not pay taxes or appear on formal labour registers7 and as such are classified as informal workers using the ILO definition cited in Charmes (2012). The boats, which act as the organisational units in the sector are private unincorporated enterprises and are thus classified as informal enterprises using the above ICLS definition.

Overview

Informal employment constitutes the majority of jobs in developing nations: Charmes (2012) suggests non-agricultural informal employment constitutes at least 50% of the national working population worldwide. In many nations this number is growing (110). Including agricultural workers 9 of every 10 workers in India are informally employed (NSC 2012).

The UN recognises the role played by informal employment in reducing the extremes of poverty amongst the 1 billion people in South and South Eastern Asia living on less than one dollar a day (ESCAP 2006). However, it simultaneously recognises that in India and elsewhere the informal sector is characterised by low productivity and low wages. Human capital theory tells us that education plays a fundamental role in increasing productivity, and by extension can be used as a social tool to reduce poverty.

Classified as those not working on large trawling vessels who continue to employ the traditional fishing methods 7 personal communication with gatekeeper (16/05/2013)

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The informal sector is thus an important area for labour economists and education planners to understand. As stated previously education planners often use rate of return estimates to make policy decisions and funding allocations: if fundamental differences exist in the size and pattern of returns to informal workers then estimates that fail to include such workers provide not only highly selective data but also potentially misleading figures.

While the augmented Mincer equation includes a number of social determinants that affect wages in formal employment such as race and gender this dissertation contests that RORE estimates for informal workers must identify a complementary set of informal determinants that capture the specific determinants of earnings in that sector.

Earnings Determinants

The sheer variety of employment and enterprises encapsulated by the term informal economy precludes any comprehensive or definitive description of the determinants of productivity and earnings (ESCAP 2006). Nonetheless this section will outline several overarching trends appearing in the international literature seen to be significant determinants of productivity within the informal sector.

A UN report states a lack of capital is one of the major constraints faced by participants in the informal sector. As a result, informal sector workers are forced to use outdated machinery, which keeps their productivity low. (ESCAP 2006: 7) This finding is supported by World Bank research into small and medium enterprises8 (SMEs) that emphasise the importance of capital investment on firm productivity and development (Beck and Demirguc-Kunt 2006; Kuntchev, Ramalho, Rodrguez-Meza, Yang 2012; World Bank 2011).

This research seeks to explore to what degree access to credit may be a significant

The NSC report states that the majority of SMEs in India operate in the informal sector (2012: 35)

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determinant of capital investment and thus increased earnings: according to ESCAP informal participants tend to have lower incomes, they are unable to save much of their income for reinvestment To obtain capital for investment, entrepreneurs in the informal sector usually borrow (2006: 7). Banerjee and Duflo (2012) caution against the simplistic view that credit is a panacea for poverty alleviation, but they too highlight the potentially vital role played by credit in the lives of the poor working in informal employment.

The use of outdated machinery due to credit constraints suggested above is linked to the second major informal determinant: technology. Jean, Hyman and ODonnell (1990: iii) have suggested, credit alone is insufficient to generate the productivity increases needed for poverty alleviation amongst SMEs and that technology plays the critical role in determining productivity and thus earnings. The World Bank (2011) finds that innovation and the ability to utilise technological advances are vital determinants of SME success and productivity in Turkey, while Taymaz (2009) shows technological differences to be a significant factor in the productivity differences between formal and informal enterprises in the same country.

A number of other factors are typically identified in the literature all of which emphasise the significance of local context in the sector: the importance of infrastructure is highlighted by ECSAP (2006) and the ILO (Palmer 2008); the role of institutions is emphasised in numerous studies (Banerjee and Duflo 2012; Gerxhani 2004; Palmer 2008); while the importance of cooperatives and unions in increasing productivity and market power is highlighted by ESCAP (2006), and the ILO (ILO 2002; Palmer 2008).

Technology, access to credit and capital investment will therefore form the basis of the interview schedule (see Methodology). While Aslam et al (2012) estimate the impact of controlling for capital investment there is currently no estimation that expressly explores the role of access to credit on returns to education. Equally while Aslam et al imply a significant role played by technology no direct estimation is made of the impact of technology on the RORE. It is hoped that by including these variables

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in the following stages of the research this dissertation will provide empirical support for the suggestion that they are significant earnings determinants in the informal sector.

2.6

Context

30% of Indians live in poverty, while 69% live on less than $2 per day (World Bank). The researcher shares the view of ESCAP (2006) that the blight of Indian poverty cannot be eradicated without understanding the informal sector; and furthermore that understanding the returns to schooling for informal workers may help Indian policy makers and educational planners design more effective interventions. Due to resource limitations it is impossible to implement a national cross-industry survey, and as has been suggested such data does not currently exist for desk-based research.

Kerala

Kerala was chosen principally for the high levels of literacy and school enrolment over the last three decades. In 1991 Kerala became the first total literate state in India (Government of Kerala 2013a). As early as 1971 77% of males were literate and total enrolment stood at 5 million (Government of Kerala 2013b), while currently Kerala has a literacy rate of 96% and 3 of every 4 people have completed at least primary education (NSS 2012). As the primary concern of this paper is the role of education in determining financial returns it is important that the sample provides a sufficiently varied cross-section of educational attainment. Kerala more than any other state in India fulfils this requirement.

Fishing Industry

Fishing has been chosen due to the direct relationship between marginal product

28

and earnings. This assumption of HCT is fulfilled by the share system employed by fishermen in Kerala. Each member of a crew receives a share of the profit from each days catch, with owners taking a larger share (Dhanuraj 2004). Consequently a higher degree of productivity should result in higher earnings for the crewmembers and there is little possibility of credentialism.

In Kerala an estimated 1 million people are directly dependent on the fishing industry for their livelihood, around 3% of the total population (Directorate of Fisheries 2010: 8). This includes some 190,000 active marine fishermen, constituting 21% of the entire coastal population, most of who work in the traditional fishing sector (17). Per capita income of fishermen is one third of the state average (7) and the various groups involved are officially recognised as OBC (other backward community) by the government of India9.

Understanding the role played by education in the potential economic development of such a large yet marginalised and impoverished peoples is important to development planners. Despite the importance of fishing to the coastal communities of Kerala (and other coastal states) no specific research on the economic returns to education for fishermen exists.

2.7

Summary

Despite a number of criticisms the Mincer wage equation remains a cornerstone of empirical economics (Heckman et al 2008: 1) and new estimates that influence public policy are produced almost daily (Heckman et al 2005: 3). In such an environment the need to extend existing research beyond the formal sector and into the expanding informal sectors of developing nations is particularly significant, nowhere more so than in India. This dissertation will attempt to provide RORE for informal workers by augmenting this parsimonious method with variables identified in this chapter as key determinants of productivity in the informal sector.
9

A measure of social underdevelopment and poverty.

29

Methodology
Contents: 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 Introduction Research strategy Sampling and coverage Data collection Data analysis Ethics Issues and limitations Summary

3.1

Introduction

Research questions:

1-

which factors are key determinants of productivity in the informal sector, with particular emphasis on fishermen in Kerala?

23-

what is the private rate of return to education for fishermen in Kerala? what difficulties arise in calculating rates of return for informal workers and what are important considerations for future research?

As highlighted in the previous chapter the researcher places great emphasis on the significance of local context, the belief that highly localised idiosyncrasies are influential in determining returns to education and earnings in the informal sector. Primary research at the local level is therefore needed to sufficiently satisfy question one and ensure that variables identified through the literature review are indeed significant. This will take the form of a small number of interviews conducted with key stakeholders. To achieve objectives two and three it will be necessary to conduct further fieldwork: available data does not contain sufficient information on the variables required to produce a suitable Mincer equation, nor explore the informal determinants identified in the previous chapter. The final stage of data collection will therefore be a specifically designed survey.

30

The next sub-sections will outline the research strategy and sampling method chosen, while 3.4 will discuss the chosen data collection choices in more detail. Afterwards the data analysis methodology will be presented explaining how and to what end the data will be used, and identifying the ways in which data analysis requirements were influential in the design of the research study from the initial stages of conception. Lastly sections 3.6 and 3.7 will explore ethical considerations and the limitations of the research methodology.

3.2

Research Strategy

This research employs a mixed method research strategy, using a small number of indepth interviews to shape the larger-scale survey that will form the focus of this dissertation. The researcher follows Tashakkori and Teddlie (1998; 2003) and Creswell (2009; 2012) in rejecting the supposed incompatibility between qualitative and quantitative strategies: it shall be shown that the two approaches feed into and inform one another allowing a richer, more holistic understanding of the situation during analysis.

This paper adopts the following definition of mixed method approaches as suggested by Creswell:

It involves the use of qualitative and quantitative approaches, and the mixing of both approaches in a study. Thus, it is more than simply collecting and analyzing both kinds of data; it also involves the use of both approaches in tandem so that the overall strength of a study is greater than either qualitative or quantitative research. (Creswell 2009: 4)

The underlying message of Creswell's definition is that mixed method or multistrategy research is the synthesis of two mutually beneficial approaches working in tandem', rather than the combination of two autonomous and separate techniques

31

in one paper. Figure 3.1 provides a graphical representation of the iterative process adopted in this research.

Figure 3.1

The iterative research strategy

Literature Review

Survey Formulation Interviews

Survey Pilot

Survey Finalisation

Survey

Data Analysis

The mixed method was adopted as neither qualitative, nor quantitative approaches could answer all the research questions in isolation. While qualitative data might help answer question one by identifying variables that determine wages in the informal economy, it would be inappropriate for answering research questions two and three, which require a larger dataset than would be feasible using qualitative

32

techniques (Robson 2011). Equally, while the econometric focus of this paper suggests a quantitative approach the limited scope of previous research into RORE for informal workers means that an appropriate survey design did not exist. To first identify important variables for inclusion into the Mincer equation, and then to measure the impact of those variables, a mixed method strategy was therefore necessary.

The strategy depicted best conforms to what Creswell (2009) terms a sequential exploratory strategy (SES). This involves an initial exploratory' phase of data collection and analysis followed by a quantitative phase "that builds on the results of the first qualitative phase." (211) The qualitative interview phase and literature review inform the design of the survey, the data analysis, and particularly the inferences drawn from the results.

According to Creswell the sequential exploratory strategy: " is often discussed as the procedure of choice when a researcher needs to develop an instrument because existing instruments are inadequate... Using a three-phase approach, the researcher first gathers qualitative data and analyzes it (Phase1), and uses the analysis to develop an instrument (Phase 2) that is subsequently administered to a sample of a population (Phase 3)." (2009: 212) In attempting to determine new variables (question 1) and assess the appropriateness of estimating returns this paper is attempting to develop an extended if not entirely new instrument, by developing an informal Mincer wage equation.

Tashakkori and Teddlie (2003: 227) suggest the relative weighting given to the two approaches within a mixed method study depends upon the interests of the researcher and what they seek to emphasise in their paper. This research will prioritise the quantitative research phase in both data collection and analysis. The interview stage is a necessary and important component of the research project in helping design the survey, triangulating the findings from the international literature

33

and ensuring the appropriateness of the survey design to the local context. Questions two and three, as well as the overall aim of the dissertation demand greater focus on and consideration of the qualitative data. This is a necessary compromise given the resource constraints of the dissertation and the overall research aim.

Triangulation

Robson (2011) suggests the process of triangulation is particularly important in smallscale research and is an inherent part of SES strategy adopted. Robson argues that "similar patterns of findings from very different methods of gathering data increase confidence in the validity of the findings (87). The first triangulation stage involves conducting a series of interviews with key stakeholders to test the conclusions drawn from the international literature on factors affecting earnings, allowing the correct specification of the later survey stage. The findings from the survey data are then cross-referenced with the interview results and compared to the international literature in the discussion chapter: it is argued that such data and methodological triangulation will increase the internal validity of (Robson 2011) and provide stronger inferences about (Tashakkori and Teddlie 1998; 2003) the research conducted.

Issues

SES research is not without limitations and difficulties, two of which will be considered here. The complexity of the design required for data collection, as well as the time and skills required for data analysis are seen by both Creswell (2012) and Robson (2009) as potential barriers to effective implementation. However, while each author emphasises the practical constraints of the approach they assert that such obstacles can be surmounted: the challenges of this approach, while not underestimated, are therefore considered necessary components of the project, rather than barriers to it.

A more fundamental challenge to mixed method approaches is the incompatibility

34

thesis; the suggestion that qualitative and quantitative research methods are fundamentally incompatible due to differing worldviews underpinning each approach (Creswell 2012; Tashakkori and Teddlie 2003). The paradigm wars' of the 1980s identified the positivist paradigm with quantitative methods, whilst qualitative methods were seen to be founded on a constructivist paradigm (see appendix 1). Positivism is seen to base knowledge "solely on observable facts" and emphasises the autonomy of experience and phenomenon from the researcher, while constructivism rose from dissatisfaction with such a worldview and emphasises the constructed, multiple nature of reality and knowledge (Tashakkori and Teddlie 1998: 10).

However, Creswell (2012) and Robson (2011) argue that such differences have in-fact been overstated. Tashakkori and Teddlie (1998: 51) suggest the paradigm wars were the result of "methodological fixation" by proponents of each method, rather than any underlying incompatibility, instead arguing for a pragmatic middle ground that rejects the search for metaphysical truths. Creswell suggests that pragmatism is in itself a worldview, the belief in "procedures that 'work' for a particular research problem" (2012: 537). To fulfil the aim of the project has been shown to require collecting, using and then analysing multiple forms of data only attainable by adopting a pragmatic mixed method strategy.

Validity

Tashakkori and Teddlie "believe that the ultimate advantage of using mixed methods is in the quality of the inferences that are made at the end" (2003: 35). As outlined previously the aim of this paper is to further an understanding of how appropriate the Mincer wage equation is as a methodology for calculating RORE in the informal sector; yet such an aim makes strong assumptions about the validity and reliability of the data collected and the analysis performed.

Generalisability (external validity) "refers to the extent to which the findings of the research are more generally applicable" (Robson 2011: 85) and efforts to create

35

statistically defensible samples that can be generalized often dictate design in quantitative research. However, i) resource constraints and ii) the objectives of this research mean that ensuring generalisability beyond the immediate sample universe is neither a) practical nor b) desirable. The need to focus on one location, over a short period of time means any attempt to ensure generalisability is unfeasible . The emphasis of the researcher on the importance of local context renders any claims to generalisability moot.

This project instead purports to provide relatable inferences; relatability refers to the degree inferences and patterns within small-scale research can be related, if not generalized, to the broader world (Bassey 1981). Bassey has proposed the relatability of findings as a viable alternative to generlisability in reference to case-studies, and Gillham (2008) recognises the benefits of such an approach to inferences made from small-scale survey data. As such the findings of research conducted in three coastal villages in Kerala will be cautiously related to potential similarities in other industries and locations, without asserting any automatic or absolute parallels.

Tashakkori and Teddlie (1998: 67) suggest that, "traditionally, internal validity has been conceptualized as the degree to which we can trust the conclusions/inferences of the researcher". Biggam (2008) has suggested that if a researcher uses the appropriate data collection and analysis techniques, and bases this on "tried and tested research strategies" then he/she is "heading towards the goal of achieving valid research." (99) Shipman (cited in Robson 2011: 93) argues that credibility is a further concern of reliable research: whether sufficient detail about, and justification of, the methods used are provided.

The following sections therefore establish in detail the sampling (3.3), data collection (3.4), and data analysis (3.5) adopted in this study in an attempt to ensure the validity, reliability and credibility of the research.

3.3

Sampling and coverage

36

Sample Universe

The sample universe will be all 810 male members of Kaikkara Fishermen Development Welfare Cooperative Society (KFDWC), the local organisation assisting with this research. The motivation for choosing Kerala and the fishing industry has been outlined in the literature review. KFDWC is a local branch of MATSYAFED10, a government-funded umbrella organisation of 666 fishing cooperatives across Kerala. The sample therefore has strong relatability to other fishermen operating in areas with a MATSYAFED presence in Kerala state11. Ease of access, as well as the availability of a complete sample frame made such a universe highly practical. The relationship between the gatekeeper (the President of KFDWC), and the participants should reduce issues of non-response as well as helping assuage ethical concerns of exploitation (see section 3.6). Additionally a broader sample universe would necessitate greater resources in terms of transport time.

Interviews

The selection of interviewees during the qualitative component of this research was by purposive sampling. Jupp defines purposive sampling as: [a] form of non-probability sampling in which decisions concerning the individuals to be included in the sample are taken by the researcher, based on a variety of criteria which may include specialist knowledge of the research issue. (2006: 244)

A variety of stakeholders were pre-selected based on a combination of their perceived specialist knowledge and their accessibility (table 3.1). Breakwell states, [t]here is no problem with the use of small, highly targeted samples that possess the characteristics you believe salient to your research question (Breakwell et al 2008: 235) and as Gillam (2008: 4) asserts, anxieties about the representative nature of a
10 11

Kerala State Co-operative Federation for Fisheries Development Ltd: http://matsyafed.org/home.htm Totalling over 300,000 members

37

sample "are unfounded if no empirical generalization is going to be claimed."

Table 3.1

Summary of Interviews Code 1 2 3 4 5 6 Date 08/05/2013 08/05/2013 10/05/2013 10/05/2013 12/05/2013* 12/05/2013 13/05/2013 Boat owner Tourism operator and ex-fisherman President of fishermens NGO President of KFDWC (gatekeeper) President of local NGO President of local fishermans union Director of VESS (local education NGO) Role

* Due to a faulty recording the results of this interview were excluded from analysis

A boat owner, a governmental agent, an NGO leader and a union leader were selected to ascertain potentially differing perspectives on both the problems facing current fishermen and future avenues to improvements in livelihood. The director of a local NGO focused on education in fishing communities was included to help the researcher understand the educational issues faced by the community. As tourism is often identified as a form of sustainable development for coastal people (Dhanuraj 2004) a former fisherman-turned-tourist operator was also interviewed.

Survey

Initially simple random sampling (SRS) was chosen as the sampling technique: Wright (1997: 9) suggests SRS is the preferred method for sampling as it provides the most reliable claims for a representative sample. However, it became clear to the researcher that the initial model was both impractical and non-representative of the target population. Gillham (2008:5) notes that there is a difference between quantitative and qualitative representation: SRS can provide a statistically but not substantively representative sample, under-representing a minority group. Sampling

38

using SRS would not necessarily include the minority of fishermen that use nonmechanised boats (roughly 10%12). Furthermore such a technique would require the researcher to visit up to 100 houses in three different villages, an impossibility given the limited time available.

In response to these issues the decision was therefore made to switch to stratified cluster sampling; an approach used when issues of time and distance are of concern, yet when a researcher desires to collect a representative sample (Wright 1997). The local contact was subsequently asked to draw up a list of all boats owned by members of KFDWC. These 152 boats would form the clusters for the survey. 19 clusters were decided upon to represent 12.5% of the total boats13: boats were then selected using a random number generator14 and all members of the selected clusters were then surveyed.

Sapsford (2007: 85) notes that cluster sampling is not strictly random, and recommends a degree of stratification to improve precision by selecting areas in terms of their known characteristics. As the interview phase revealed the importance of boat type the sample frame was separated into mechanised and nonmechanised boats. The decision was taken to disproportionately sample from the non-mechanised boats to ensure a true measure of earnings variance was achieved (10% of the sample would have been just two boats, and any abnormalities in one boat might skew the results dramatically). This was dealt with in the data analysis stage through the description of the survey design15: the two types of boats were weighted according to the probability of their selection from the original sample and a post-stratification weight was included to ensure a 9:1 weighting in the final regression results.

The issue of sample size for the survey phase of this research was one that greatly

12 13

All figures in this section based on KFDWC records. 15% would have required 23 boats which was deemed too many. 14 www.random.org 15 FPC= 19/152 : pweight mechanised= 137/16 : pweight non-mechanised= 15/3 : postweight mechanised= 0.9 : postweight non-mechanised= 0.1

39

occupied the researcher: as "the amount of sampling error is [usually] a direct function of the number of units included" (Leeuw, Hox and Dillman 2008: 7) resource constraints place limitations on the precision with which one can give confidence intervals. The eventual sample size was 92 respondents from the 19 clusters. This is above the 86 required for a confidence level of 95% with a confidence interval of 10% from the sample universe of 810 persons (based on www.surveysystem.com calculator). Two observations from Patrick Sturgis are worth noting here, that the magnitude of any differences or correlations are of importance separately from their statistical significance and that studies with small samples may give indications of fruitful avenues for future research. (Breakwell et al 2006: 120) The stated aim of this research is to further an understanding of how appropriate the Mincer wage equation is as a methodology for calculating informal sector RORE: in this way this dissertation is very much forward-looking and does not seek absolute, definitive conclusions. Rather, the researcher hopes to indicate fruitful avenues for future research on RORE in the informal sector.

3.4

Data Collection

Interviews To avoid doing irrelevant research and get a more valid response" Gillam advises allowing a sample from the survey group to tell you what issues are important. (2008: 32) Accordingly the first stage of data collection was a series of semi-structured interviews (appendix 3). Each interview was one hour long and was recorded while the researcher also took notes (Robson 2011: 156 recommends such an approach to ensure description validity). Appendix 2 shows the consent form, including the explanation given to each participant for why the research was being conducted. In three of the interviews the gatekeeper was required to translate.

As suggested in the previous chapter the design of the interview schedule was based

40

on the findings of the literature review. The schedule includes questions on those variables identified in the informal literature and RORE literature as key determinants of earnings. While the interview process is particularly valuable for exploratory research where little is known or issues are complex (Liamputtong 2009: 61), there is a danger that fully structured interviews may miss very salient issues (Breakwell et al 2006: 237). The decision to use a semi-structured interview schedule, rather than a fully structured design thus reflects the investigative purpose of the interview stage. In small-scale research Robson (2011: 285) suggests an approach in which the interviewer has their shopping list, while allowing freedom in the amount of time and attention given to different topics. When departing from a fixed design comparability across respondents is sacrificed for the sake of individual relevance (Breakwell et al 2006: 237), yet given the exploratory nature of the interview stage such an approach was deemed most appropriate.

Pilot

The pilot phase was included to improve the design specification of the survey and empirically test the appropriateness of the variables selected through the literature review and interview stage. Five fishermen were selected using convenience sampling and surveyed using the draft survey. Confusion during the pilot phase over words like debt and capital and stock required simplification in the final survey. The pilot phase further allowed consideration of the routing process and the final design reorganised the questions into subtopics which were designed to flow more coherently than in the original model (Sapsford 2007). The pilot while brief nonetheless confirmed the appropriateness of the variables selected and cursory empirical analysis convinced the researcher of the strength of the survey design.

Survey

The requirements of the Mincer equation necessitated quantitative data collection due to the lack of existing data sources. Creswell (2009: 145) suggests a survey design provides a quantitative or numeric description of trends of a population by

41

studying a sample of the population, while minimizing the cost and time required to collect data and was thus the most appropriate methodology for this research (146).

Whilst cost and time were highly significant factors involved in the design process, the ability to improve response rate and conduct more complex, detailed data collection was seen to preference face-to-face interviews over postal, internet or telephone interviews (Robson 2011: 244). Gillham (2008: 6) suggests in compromises "between quantity and quality the latter should always be the primary consideration; and that a small-scale survey, intensive in character, is more likely to provide significant data and indicate the probable useful content for a larger-scale survey. The research aim suggests such an approach; the project intends to develop an instrument (an informal Mincer equation) for use in future research.

Due to the lack of postal addresses access was almost entirely negotiated on-site by the contact who was asked to translate a standardized introductory passage before requesting consent (appendix 4) and interviewees were asked whether they would prefer group or individual interviews. The pilot phase had demonstrated that the fishermen preferred to be interviewed in groups; this was a parsimonious method allowing more time-efficient collection of data. All respondents chose group interviewing. Photo 1 below shows the typical scenario in which the interviews took place: for expedience each question was posed in turn to all candidates by the translator using the fixed-schedule and the results recorded on the entry form by the researcher (appendices 5 and 6).

42

Photo 1

Typical crew repairing nets in Mampilly

Survey design

Fowler and Cosenza suggest that to be able to answer a question correctly a respondent must be able to: understand the question; retrieve the information; and provide the answer (Leeuw et al 2008:137). According to Fowler and Cosenza the key to ensuring understanding is making questions that are consistently understood by avoiding abstract, ambiguous, or technical language as well as providing clear timescales.

Sapsford (2007: 104) distinguishes between direct and indirect questions, suggesting certain questions such as earnings and age are factual in nature and easily quantifiable. In contrast indirect questions (often referred to as attitudinal) present greater problems for the researcher in terms of phrasing and later coding. While potentially informative the difficulty in standardising responses to attitudinal questions, and the extra time required for collection and analysis discounted such an

43

approach. Ultimately the specific data requirements of the Mincer equation and the objectives of this research required indirect questions to be excluded.

Concerns over how best to ensure respondents could retrieve information relating to earnings (the dependant variable in the Mincer regression) were resolved by the gatekeeper who was confident that monthly earnings were the most reliable measure available. While all workers and most owners received earnings after costs a number of boat owners used a share system that was before costs. To ensure earnings information was retrieved accurately it was necessary to measure income in either net or gross earnings. A cost of 25% was then assumed based on estimations by the gatekeeper and informal conversations with the individuals involved. The last problem, of asking questions to which people are willing to respond, is associated with sensitive information and will be discussed during the ethics section.

3.5

Data analysis

Qualitative

As Creswell notes in SES research "the researcher has to make some key decisions about which findings from the initial qualitative phase will be focused on in the subsequent quantitative phase", a process which is not neutral, and will impact any inferences made (2009: 212). The process used is described by Creswell as data transformation or the quantification of qualitative data: this involves creating themes (such as the importance of technology) and then counting the number of times such a theme occurs (2009: 218). Those variables seen to be most important based on the interview responses were subsequently included in the survey schedule.

Data manipulation

After the collection of the survey data it was transferred to an Excel spreadsheet for

44

cleaning and manipulation. Given the small size of the dataset cleaning was done manually by the researcher; first cross-referencing against the original data, before checking each variable for unexpected results and restricting legal codes and maximum distributions (Fowler 1993: 128). Nominal variables such as village were coded for statistical analysis.

A number of dummy variables were generated: school level dummies were created to allow a disaggregated analysis, as well as dummies for craft-type and use of GPS and loans. In addition average schooling and experience variables were constructed by generating mean levels for each boat. Owner experience and schooling variables were also generated. Assumed experience variables were generated by subtracting school-leaving age from age (as used by Dutta 2006).

Yearly earnings were calculated by multiplying in-season earnings by five and out-ofseason earnings by seven to reflect average yearly earnings. This was then converted to daily and hourly earnings using the reported times. These values along with figures for total credit, capital and stock values were then converted to a natural logarithm using the =LN function in Excel. The final dataset was then exported to the STATA programme for testing.

Statistical testing

The framework for data analysis was extensively detailed in the literature review. Ultimately the need to perform specific econometric tests directed the entire research process. The Mincer wage equation is a semi-log linear regression and this formed the majority of the statistical analysis.

After generating summary statistics a simple Mincer regression was run as the base model. Afterwards selected variables were introduced separately to analyse the impact of their inclusion on the original simple Mincer model. Following this a final specification was determined based on the previous stages and the complete regression run. Additional regressions were then estimated to test for the effect of

45

average, village and owner education instead of individual schooling. In addition to running multiple regressions the researcher employs Pearsons Chi-square tests to test for endogeneity and Cramers V to measure strength of association. See appendix 10 for the final do-file.

3.6

Ethics

The research was conducted according to the ethical guidelines established by the British Educational Research Association (BERA 2011). The role of the researcher who investigates social phenomena is not the same as that of a physicist: providing the data to help future policy interventions, as well as gaining consent were two approaches taken to treat respondents as people rather than objects (42). To this end at all stages individuals were asked for their informed consent including the right to withdraw consent at any stage (BERA 2011; Gillham 2008), and when necessary verbal translation of the consent form was conducted (Appendices 2 and 4). It was hoped that providing KFDWC with the results would assuage fears of the research as take, hit and run (Reinharz cited in Sapsford 2007: 42).

Fowler and Cosenza suggest that assurances of confidentiality and trust can go a long way to appeasing concerns over sensitive information (Leeuw et al 2008). This research collected sensitive data therefore confidentiality was of great importance. As outlined in the consent forms all data was stored, analysed and is reported anonymously. The data itself is stored digitally under password protection, will only be processed for purposes suggested in the consent form, and will not be passed on to any third party.

3.7

Issues and limitations

Fowler notes that non-response is potentially a source of greater error in research than sampling error, although it receives far less attention (1993: 36). The eventual

46

response rate was 97% with just 3 non-responses. Of the ninety-five individuals within the nineteen clusters two were unable to be contacted despite a second attempt, while one individual refused to participate. This is well above the level of 75% used by the US Office of Management and Budget as the minimum for generating valid survey data (Fowler 1993: 40), and implies the final sample broadly represents the original sample.

Participant error and bias are potential pitfalls of any interview or survey research and while internal consistency checking offers you one way of assessing the validity of the data it is no absolute guarantee (Breakwell et al 2006: 247). In the interview stage there is the potential desire to appease the interviewer or to save face (248). Breakwell et al (2006: 248) suggest that while interviewer effects are unavoidable components of interview research, having one interviewer can help control them.

The shift from individual to group surveying also has interesting consequences for concerns of error and bias. Certain questions, such as estimated earnings or hours worked, would arguably benefit from an internal consistency checking process as members of the same boat verify or contradict each others assessments. Although all survey questions were direct or factual and were piloted to ensure the wording was clear and consistent, certain questions would arguably create bias through the social desirability effect (Sapsford 2007: 103): while no discomfort or embarrassment was noticeable during questions about borrowing, earnings or schooling this does not discount bias (or error).

Coverage error "occurs when some members of the population have a zero possibility of being selected" (Leeuw et al 2008: 7). By clustering in boat crews a small number of shore-only workers were disqualified from selection. This error only became apparent during the second week of the survey when a conversation with the local contact revealed such a population. The shore-only workers earn a smaller share and are often the youth still in school who work only a few hours in the mornings. Mincer (1974) has argued that any work done while still in school off-sets direct costs to schooling, and thus the exclusion of this sub-group is accounted for in

47

the assumptions of the Mincer equation discussed in the previous chapter.

Only male members have been chosen as research into the effects of gender on returns to education in India is extensive (Aslam et al 2012; Kingdon and Unni 2001) and does not form part of the 'informal determinants' under investigation. Female members of the cooperative are involved in the selling rather than harvesting of the fish and therefore face different wage determinants and compromise had to be made regarding research scope and diversity.

3.8

Summary

Due to the aim and research questions of this dissertation two factors have shaped the methodology adopted: the need to collect both quantitative and qualitative data, and the overarching requirements of the Mincer wage equation. The mixed method approach employed allows the significant data requirements to be fulfilled, while either qualitative or quantitative methods in isolation would have been insufficient. The priority given to the quantitative data in both collection and analysis allows Mincer wage equations to be estimated. This chapter has established the justification and precedent for each stage of research design, and demonstrated the steps taken to minimise error and bias.

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Findings
Contents: 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 Introduction Qualitative Stage Survey: descriptive statistics Simple Mincer Equation Variables Preferred Specification Rate of return Average effects Testing assumptions Estimation issues Summary

4.1

Introduction

This chapter builds on the literature review by describing the results of the empirical analysis. The following section describes the results of the initial qualitative interview stage. As suggested previously this stage is concerned with answering research question one by identifying key determinants of productivity for fishermen in Kerala.

The proceeding sections (4.4- 4.8) focus on question two by estimating the private rate of return to education for fishermen in the sample. Sections 4.9 explores the sensitivity of the Mincer equation to specification changes and the implications of this to estimating informal RORE run to help answer question three.

As clearly established in the methodology this research prioritises the quantitative research phase in both data collection and analysis (section 3.2). Creswell (2009: 207) suggests the relative weighting or priority given to the two approaches within a mixed method study depends upon the interests of the researcher and what they seek to emphasise in their paper. This dissertation explores the use of the Mincer wage equation within the informal sector; an econometric calculation that necessarily requires focus on quantitative data analysis. This decision is therefore

49

taken with consideration of the overall aim of the research.

4.2

Qualitative Stage

This section focuses on the qualitative results with specific reference to research question one: honing the variables used in the later survey stage. The matrix below presents these findings using Creswells concept of data transformation (see section 3.5): the findings are first quantified and variables are then identified for inclusion in the final survey based on the number of times they are identified as wage determinants in the interviews. Broader issues raised in the interviews but not directly related to the selection of variables will be explored later in the discussion and considered in relation to the findings of the survey stage.

Table 4.1

Matrix of interview responses 1 N N Y 2 N Y Y 3 N Y 4 N Y Y 5 N Y Y 6 Y Y

Topic Education Do more educated fishermen earn more? Is education seen as a route to alternative employment? Would technical education help fishermen? Mechanisation Do mechanised fishermen earn more? Does education encourage mechanisation? Technology Do fishermen using GPS earn more? Does education encourage the use of GPS? Ownership and credit Is access to credit important to earnings?

Y N

Y -

Y N

Y N

Y -

Y N

Y -

Y N

Y Y

* Where no clear reference is made to a variable the entry has been omitted.

The overall trend in support of the significant role of technology and access to credit

50

is in accordance with the international literature on informal enterprises and wage determination. While there are disagreements in the responses to certain variables the interview stage provided sufficient local context to design the survey with a focus technology, access to credit and the importance of ownership of the means of production.

The unanimous perception that education plays no role in increasing earnings within the industry, while technology and ownership are significant wage determinants implies that an augmented Mincer wage equation is necessary to accurately capture the returns to education.

4.3

Survey: descriptive statistics

The survey was administered to ninety-two individuals in Mampilly, Kaikkara and Anjengo over three weeks from 14/05/2013 to 31/05/2013 (summary statistics in appendix 7). Table 4.2 shows summary statistics for schooling, experience and earnings disaggregated by village.

Table 4.2

Summary statistics by village

Mampilly Years of education (mean) 5.2 Years of experience (mean) 25.9 Completed basic education % 61 Completed compulsory education % 7 Weekly earnings (rupees) 2889 Observations 62 Number of clusters 14

Anjengo 4.5 28.4 55 0 2896 11 2

Kaikkara 2.6 31.9 25% 0 2146 12 3

All 4.8 27 55 5 2793 92 19

It is noticeable that Kaikkara village has a markedly lower education average. This had potential implications for sampling bias: the majority of boats were selected from Mampilly, with Anjengo and Kaikkara making up the remainder. This is roughly

51

proportional to the 70%, 15% and 15% distribution of vessels by respective village in the survey universe. A sensitivity test (table 4.3) shows that including a poststratification weight for village produces nearly identical results to when no weighting is included; therefore this potential bias is assumed to be a non-significant source of error and the findings robust. The noticeable drop in returns is explained by the overemphasis of the non-mechanised boats when dropping the 9:1 weighting by boat-type in favour of village weighting.

Table 4.3

Alternative post-stratification weighting

No weighting

Weighting by village 0.0328581 0.0842122 -0.0192617 0.0351565

Weighting by craft 0.0701098 0.1346565 0.027191 0.0980183

Below lower primary 0.0333136 Lower primary Upper primary High School 0.0738713 -0.0221551 0.0300063

Schooling

Across the entire sample the average of 4.8 years of schooling is just shy of the 5 years of basic primary education, however only 55% have actually completed this level suggesting an unequal distribution with relatively fewer individuals attaining significantly higher levels. Figure 4.1 demonstrates a large skew towards the top and bottom reflecting the unequal distribution of education16.

16

No individual interviewed had progressed beyond high school.

52

Figure 4.1

Distribution of schooling

Frequency

10

15

20

4 6 Years of schooling

10

Earnings

Table 4.2 shows an earnings difference between respondents from the three villages and the graph below shows the total distribution is uneven. While the vast majority are seen to earn between log 5.75 and 6.75 two further peaks are clearly visible. The lower earnings peak represents those working in non-mechanised boats. The significant peak above 7 represents boat owners who take a higher share after costs. This analysis further suggests the significance of two variables identified in the literature review and interview stage; the importance of technology and of owning the means of production.

53

Figure 4.2

Earnings distribution

Density

1.5 0
5

.5

5.5

6.5

7.5

Natural logarithm of daily earnings

kernel = epanechnikov, bandwidth = 0.0924

4.4

Simple Miner Equation

Empirical analysis suggests a weak relationship between earnings and the key independent variables of schooling and experience. Figure 4.3 explores graphically the relationship between schooling and earnings: while the fitted line is upward sloping implying a degree of correlation between more schooling and higher earnings, the distribution is highly dispersed (a high variance) suggesting that this relationship explains only a limited degree of the wage variation and implies significant returns to unobserved factors.

54

Figure 4.3

Relationship between earnings and schooling

7.5 6.5 5.5 5

0
bandwidth = .8

10

years of schooling

Figure 4.4a depicts two shapes of age-earnings profile identified by Becker (1993). The assumption of HCT is that on-the-job training and experience have a wage premium; hence earnings increase with experience (line T). Becker suggests that in the absence of human capital growth the age-earnings profile would in fact be flat (line U). Figure 4.4b shows the age-earnings profile of the sample which seems more closely related to the flat line Becker suggests would be seen in situations when persons received the same earnings regardless of age suggesting a lack of investment in human capital during the working life of fishermen (1993: 37).

55

Figure 4.4a

Expected age-earnings profile according to HCT

Earnings

Age Source: Becker (1993: 37)

Figure 4.4b

Age-earnings profile of fishermen

L ow e ss s m o o t h e r

7.5 6.5 5.5 5 6 7

0
bandwidth = .8

20

40

60

years of experience

The next stage of analysis aims to directly answer research question 2 by estimating the RORE using the simple Mincer equation:

56

ln W S E E 2

(Equation 2)

This model produces a 2.7% return to each additional year of school attended by fishermen in the sample (Table 4.4). An annual return of 2.7% is significantly below the RORE suggested by the influential Psacharopoulos and Patrinos (2004) study, and as an IRR this figure is below the market interest rate. As was highlighted in the literature review the figures provided by Psacharopoulos and Patrinos have been criticized as inaccurate and inflated, while recent India literature suggests single figure returns.

Table 4.4

Per year rate of return to education: alternative specifications

Simple Mincer (1) Schooling Below Lower Primary+ Lower Primary Upper Primary High School R-squared 2.75 0.0512

Simple Mincer Categorical variable (2) 9.87* -1.17* -1.62* 21.81* 0.1145

Preferred Specification (3) 2.36 3.28** -3.52 3.60 0.8328

No schooling as reference category. Significant at * 10%, **1% level or better + Below lower primary is calculated as 3 years as the mean years attended by this category The R-squared value shows that the simple Mincer wage equation explains just 5% of the wage variation in the sample, while the model itself is not statistically significant (F= 1.12, p>F= 0.3687). The next stage of research involves augmenting the Mincer equation to reduce the omitted variable bias and improve the power of the model to explain wage variation as suggested by the literature review and interview results.

57

4.5

Variables

Firstly it was necessary to relax the assumption of linearity in education (as suggested by Aslam et al 2012; Dutta 2006; Lemieux 2006). Secondly the wage determinants identified through the literature review and interview phase were introduced to test their effect and explanatory power.

Inputting Education

The graphic below shows that using the categorical variable the returns to schooling are significantly non-linear and therefore the years of schooling model is rejected. Compared to never attending the return to completing lower primary is 30%, but drops to 23% for completing upper primary before a large increase to completing high school of 83%. The large return to high school is potentially significant as this is the newly legislated compulsory education period.

Figure 4.5

Educational returns by level

* Reference group is no schooling. Figures are per level not per year

Table 4.4 shows that the using the categorical variable (highest education level completed) improves the explanatory power of the model. While only explaining 11.5% of the wage variation this model is nonetheless a significantly better fit than

58

the simple Mincer equation. This specification also produces lower p-values for the returns with all levels significant at the 10% level or better, suggesting a statistically significant relationship between schooling and earnings when non-linearity is taken into consideration.

Selecting Variables

Appendix 8 presents complete estimates for the inclusion of different variables to the simple specification. The inclusion of all variables (whether individually or in combination) reduced the schooling coefficient, strongly suggesting omitted variable bias in the simple Mincer model. The improved fit of the model is also a powerful indication of the significance each variable has for earnings determination, a finding supported by results from Cramers V-tests which showed consistently strong association between earnings and the variables.

Social Determinants

The village of the respondent is included to attempt to control for the large discrepancy in mean schooling that might otherwise distort the rate of return. All respondents are Latin-Catholic Sero-Malabar; therefore no control is included for caste or religion. Similarly all respondents listed grandfathers occupation as fisherman indicating a natural fixed-effects control for family background. Marital status and number of children are non-significant factors in wage determination and are thus excluded from the final model.

Technology

The variable craft is a dummy measuring whether the traditional man-powered catamaran or new fibreglass boat fitted with an out-board motor is used. GPS is a dummy variable for whether GPS technology is employed on the boat. These two variables are seen to dramatically increase the ability of the model to explain the wage variation, while reducing the schooling coefficient at all levels.

59

Credit and Investment

The role of capital investment was captured using the log of stock capital following Aslam et al (2012). This variable captures the role played by boat ownership, and allows the separation of the contribution of physical capital from human capital. As expected this variable significantly reduced the schooling coefficient for all levels. A dummy variable for whether the individual had taken a loan in the last twelve months was also included to directly capture the importance of access to credit.

Table 4.5 shows the coefficient for each variable before and after inputting education. It shows that excluding village and credit each variable is statistically significant at the 1% level while controlling for all other factors and that this finding is robust when education is included.

Table 4.5

Summary Statistics: Additional Variables Without education -0.04413 (-0.93) 0.67172 (3.30)** 0.25339 (4.82)** 0.05005 (8.66)** 0.11851 (1.46) 5.290237 With education -0.04391 (-1.10) 0.62621 (3.57)** 0.26602 (6.07)** 0.04858 (8.26)** 0.11837 (1.61) 5.22969

Village Type of Craft Use of GPS Capital Stock Use of Credit Constant

Adjusted R 0.8159 0.8328 T-values in parenthesis. Significant at **1% level or better. Experience not reported

4.6

Preferred Specification

60

As outlined in the literature review this dissertation employs an augmented Mincer equation including variables to account for social determinants (X):
ln W S E E 2 X

(Equation 3)

It also includes controls for the variables identified above (D):

ln W S E E 2 X D

(Equation 5)

In principal the contribution of D and X are the same: exogenous explanatory variables that influence earnings. The separation of social determinants (X) and informal determinants (D) is purely conceptual, and is used to highlight the significance of the findings in this research.
lnW S E E 2 X (v) D(c, g, i, l )

(Equation 6)

Equation 6 is the final specification where v is village of operation, c is type of craft used, g is a dummy variable for use of GPS, i measures capital investment and l is a dummy variable for use of credit.

4.7

Rate of return

Using the widely adopted approach popularised by Mincer the schooling coefficient can be interpreted as the internal rate of return to the investment in schooling under the assumptions discussed in the literature review.

( i i 1) (Yi Yi 1)

(Equation 4)

61

Figure 4.6 shows the rate of return for each level estimated using both the simple and augmented Mincer regressions. As can be seen the augmented model significantly reduces the estimated RORE at each level (full coefficients provided in appendix 9).

Figure 4.6

Rates of return: simple and preferred models

Including additional variables reduces the economic returns to education at all levels for the sample population, with the most dramatic reduction occurring for high school graduates (83-10%). It also removes the unexpected pattern of higher results to those with below primary education compared to those who complete primary school. This suggests that the simple Mincer equation suffers from significant omitted variable bias and that this bias is not evenly distributed; not only changing the size of returns but also the pattern. This is confirmed by the increase in the power of the model to explain wage variation from 11 to 83%.

Table 4.4 gives the rate of return to an additional year of schooling divided by levels. Most important to note is that based on the augmented model fishermen in the sample face no incentive to invest in education beyond lower primary education. As the figures are cumulative the negative figures are relative to the previous level, rather than compared to never having attended. While the return to the two years of

62

high school is positive compared to upper primary they have a negative return of 0.73% per year compared to lower primary. The finding of positive returns to completing lower primary school is significant at the 1% level and has a t-value of 2.88.

4.8

Average effects and externalities

As multiple employees depend on the investment decisions of one owner the potential significance of owner, boat and area education effects on earnings are considered here. All estimates that follow use the continuous variable and the complete set of augmented variables.

Table 4.6

Owner education, boat average and village average

Individual Schooling Experience 0.00558 0.00206

Owner 0.00821 0.00129

Boat 0.00029 -0.03625

Village 0.31097 0.00342

Ruttan and Tyedmers (2007) suggest that skipper skill is an important determinant of productivity for US fishermen, a finding echoed by Lokina (2008) for artisanal fishermen on Lake Victoria. It may therefore be that in the sample population individual education is less important than that of the owner. Interestingly education does not appear to be a determinant of ownership: the average education of an owner is 4.36 years, compared to 4.87 for labourers. Table 4.4 shows that each extra year of education for an owner increases the average earnings of the enterprise by 0.8% compared to a return of 0.5% to an individuals additional year. The low t-value (0.89) and high p-value (0.383) discount any assertions of the strength of this relationship; however the potential for such a correlation suggests an area for future research.

63

Estimates were also made of the average education and experience levels of each boat to ascertain the impact of this modification. What is clear is that boat effects have no significant correlation to productivity. Average schooling has a t-value of 0.01 (P>t = 0.991) and a potential return of 0.03%, therefore we can reject average schooling as potentially significant to earnings.

Finally the village average education level is substituted for that of the individual. In this specification the return to an additional year of average schooling to the village are remarkable: 36%. This coefficient has a t-value of 12.26 and is statistically significant at better than the 1% level.

4.9

Testing assumptions

By measuring the sensitivity of the Mincer equation to specification changes this research provides an opportunity to assess the accuracy of certain widely used approximations in the RORE literature necessitated by data limitations.

Earnings

Two papers calculating RORE in India have employed alternative methods to inputting earnings from the same national survey dataset. Duraisamy (2002) uses average daily wages based on the reported figures, while Dutta (2006) approximates hourly wages based on an ordinal scale of work intensity.

Figure 4.7a presents the sample earnings distribution using a log of hourly earnings, while figure 4.7b shows the same distribution while recording log of daily earnings. While both graphs clearly show a secondary peak at the top of the distribution, indicating the presence of the owners, only in figure 4.7b is there a clear tail towards the bottom of the distribution. As non-mechanised fishermen earn significantly less per day this indicates that the use of hourly wages masks the negative impacts of low

64

technological take-up.

Figure 4.7

Hourly and daily earnings distributions

4.7a
2
2 Density 0
5

4.7b

Density

1.5

.5

.5

1.5

3.5 log of hourly earnings

4.5
kernel = epanechnikov, bandwidth = 0.0775

5.5

6.5

7
kernel = epanechnikov, bandwidth = 0.0924

7.5

log of daily earnings

Non-mechanised fishermen work on average 8 hours per day, half that of their mechanised peers, while their average earnings equal almost exactly half (49%). This means that an hourly measure collapses any difference between mechanised and non-mechanised enterprises. The indication is that mechanisation is not increasing per-hour productivity, however the reduced physical demands of using a boat with a motor, and the ability to move to superior fishing grounds does have a significantly positive impact on their overall ability to earn and raise themselves out of poverty (non-mechanised fishermen who are not owners earn just 3 dollars per day).

Experience

Accurate experience-earnings profiles are rarely available in survey data, and so most Mincer regressions are estimated using an approximation of experience (Harmon et al 2003). However, Harmon et al find that such approximations bias estimates downwards, underestimating the returns to education by around 2% (123). Table 4.7 shows that assumed experience consistently underestimates the return to education in this research to a similar degree. Given the small size of returns any such underestimation could distort both the pattern and size of estimates.

65

Table 4.7

Rates of return: true and assumed experience Assumed Experience* True Experience 7.26 14.41 2.76 10.30

Never Below LP Lower Primary Upper Primary High School

6.41 13.31 1.24 8.55

* based on the standard practise of age minus education leaving age (Harmon et al 2003)

4.10

Estimation issues

The measures included for ownership are unfortunately incomplete and likely overestimate the returns to education for owners. It was impossible to determine earnings for owners after repayment of loans has been accounted for: due to the complexity of their loans there was no clear repayment schedule (many borrow extensively from friends and family as well as official sources.) On average owners earn 120,055 rupees more than their crewmembers yearly; however the average credit amount was 187,286, or 156% of the yearly premium. While no estimate of repayment can be made it is reasonable to suggest that repayment of loans would substantially reduce the premium for ownership, and ultimately the returns to education.

This design weakness was exacerbated by an error of the researcher during data collection. Faced with multi-boat owners the researcher collected complete data for the boat on which the owner worked daily and information about additional income only from any additional boat. Unfortunately as a result data was not collected on the capital, stock and credit variables for each additional boat. Estimates were run using assumptions of equal capital and credit values for each additional boat as a sensitivity test.

66

Figure 4.8 shows the findings of this approach: the results exaggerate the impact of ownership, skewing the entire pattern of returns towards high school. The red line shows the preferred specification while the blue line depicts the multi-boat model. Lines showing the disaggregated returns to owners and labourers have also been included. These demonstrate that the steep returns to high school seen in the specification for multi-boat owners can be accounted for in the exaggeration of the impact of ownership on the model.

Figure 4.8
40

Rates of return to ownership

30

Rate of Return

20
M ulti- B oat P referred O wners L abourers

Return

10

0 Be low LP -10 LP UP HS

-20 Hig he st Le v e l

In the multi-boat model the returns to labourers remains the same; therefore the large increase in the returns to fishermen is only an increase to owners. As owners represent around one tenth of the total fishing population the decision was made to drop the multi-boat specification from the estimates given previously to avoid significant upward bias in the results (as the return to owners is upward biased due to inability to control for loan repayment). It is assumed that the underestimation for a number of individuals with several boats offsets the general overestimation to ownership discussed above.

Endogeneity of technology

One major concern of the project was the potential for technology to be

67

endogenous: if uptake of technology is directly related to schooling then including technology as an independent variable would significantly underestimate the true value of education in the model.

Pearsons Chi-squared tests were run to determine association between the use of technology and schooling. Table 4.8 shows the results of multiple tests including those just for owners. Under none of the eight specifications does the probability of the relationship being coincidental approach even the 20% level. T-tests confirm this trend. Furthermore whenever the probability of the relationship being coincidental was below 50% the Cramers V estimates were consistently low, suggesting a weak as well as statistically insignificant relationship.

Table 4.8 Hypothesis

Testing for endogeneity: measures of association Group All Owners education are more All Owners schooling are more All Owners schooling are more All Owners
education are more

Individuals with basic likely to use GPS Individuals with basic likely to be mechanised Individuals with more likely to use GPS Individuals with more likely to be mechanised

Chi2 Probability Cramers V 1.74 0.186 0.139 1.4 0.237 0.316 1.26 0.260 0.117 0.42 0.515 0.174 7.96 0.538 0.296 4.2 0.756 0.548 9.34 0.407 0.320 5.09 0.649 0.603

This finding conflicts with Jamison and Lau (1982) who suggest that technological uptake is strongly related to educational attainment in Thai farmers. However, Kalirajan and Shand (1985) reject their finding, suggesting the correlation results from poor model specification. Given the results and the unresolved debate in the literature the researcher cautiously rejects the endogeneity of technology in the model. Triangulation with the qualitative phase further suggested a lack of association between mechanisation and schooling in the survey.

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4.11

Summary

Chapter four has presented the analytical steps undertaken in this research. The analysis of the interviews attempted to ascertain the applicability of key variables identified in the literature review ensuring that appropriate variables were included in the proceeding survey stage.

This chapter then presented the results of RORE calculations, showing that individuals in the survey population have little motivation to invest in education beyond basic primary schooling of five years. The findings also show a U-shaped pattern of returns to education. Alternative specifications have suggested the presence of externalities at the village level, implying positive and large social returns to education.

The preferred specification using informal determinants has been shown to greatly improve the accuracy and explanatory power of the simple Mincer equation. The sensitivity of the Mincer equation to assumptions about working time and experience has been demonstrated and a number of difficulties involved in estimating RORE in informal sectors highlighted.

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Discussion
Contents: 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.7 Introduction Rate of Return Other studies Implications for local policy Implications for theory Methodology: issues and considerations Future work Summary

5.1

Introduction

While the previous chapter divided the qualitative and quantitative results into separate categories this discussion chapter seeks to tie together the narratives of each stage, presenting a holistic picture of the results and of the role of education in the economic wellbeing of the respondents. First the implications for local policy and private investment decisions will be considered. After this the researcher will consider what the findings suggest for the use of the Mincer equation as an approach for calculating informal RORE. Finally a number of limitations will be considered and directions for future research will be suggested.

5.2

Rate of Return to Education

The returns to schooling seen in the previous chapter imply that only basic schooling of 5 years is seen to provide productivity-enhancing and poverty-reducing skills. Education beyond that level has no effect or indeed negative returns, a significant finding particularly as recent government policy has increased compulsory education to high school completion. This negative private IRR implies that the returns to additional years of schooling will not offset the opportunity costs incurred. A number of possible explanations for such a pattern are feasible.

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Firstly it could be that the basic skills taught in lower primary such as literacy and numeracy enable individuals to negotiate better deals for their produce. Photo 2 shows the public marketplace for fish that operates each morning: in such a hectic environment the basic skills of primary school may enable fishermen to increase their earning without increasing their catch load. Equally changing input costs such as gasoline prices may enable more educated crews to gain a competitive advantage by reaching a more technically efficient frontier (Jamison and Lau 1982; Schultz 1971). Beyond this basic watershed fishermen may have no use of more advanced skills, implying flat returns.

Photo 2

Open public market in Mampilly

There appears to be little evidence of credentialism in the sample: those with some education below the primary level enjoy returns of a similar quantity per year to primary graduates, while those who complete high school experience at best flat returns to their credentials. This suggests that the cause of increased earnings for the

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sample population is indeed the higher human capital suggested in HCT. It also supports the explanation suggested above that the lack of returns to high school and upper primary are evidence of an education-workplace disconnect: the skills acquired during the later levels of compulsory schooling do not add to the productivity of fishermen in the sample.

The potential for selection effects is also significant and needs to be taken into consideration. The seeming desire of members of the community to leave fishing and enter alternative employment, combined with high levels of unemployment in Kerala (Rose and Jament 2012) is likely to mean that fishermen with high levels of schooling are those unable to find other jobs. This may mean that high school graduates in the survey are those graduates unable to convert schooling into human capital effectively; and so the low productivity gains reported may be a symptom of the sample itself, rather than of poor schooling.

A final explanation for the negative returns beyond primary school has been suggested by Tsang (1987) and Hersch (1991). If fishing is viewed as a low-skilled, low status job then those with more education than needed may reduce their productivity due to the belief they are overeducated. Such a potential effect is suggested by the interview responses with five of the six respondents explicitly discussing education as a route to alternative employment. The President of the local fishing NGO specifically cited the dislike of fishing amongst the more educated as the cause of high unemployment in coastal villages. Rose and Jament (2012) present evidence of similar aspirations amongst fishermen in a neighbouring district of Kerala, finding strong evidence that fishing is indeed viewed as low status.

5.3

Other studies

Correlation between basic education and increased earnings is not a guarantee of causality and this relationship could be the result of a third-party influencing both the dependent and independent variable (Fagerlind and Saha 1997; Jamil 2004).

72

However, the abundant literature on rates of return and human capital support the findings of this paper. While repetition and larger studies would add certainty to the findings the similarity of the results to those from comparable Indian literature lend credibility to the research findings.

The U-shaped pattern of returns found in this research parallels previous Indian findings that have challenged Psacharopoulos claims of increasing returns to education. Duraisamy (2002) and Aslam et al (2012) find returns to education amongst formal workers in India dip between 5 and 10 years. This accords to a drop between lower primary (5 years) and upper primary (8 years) seen in this research, followed by an increase between 8 and 10 years.

Table 5.1

Private rates of return from studies in India Lower Primary 3.28 1.11 6.40 7.90 Upper Primary -3.52 -0.20 0.10 7.40 High School 3.60 -0.12 13.5 17.3

This study Dutta (2006)* Aslam et al (2012) Duraisamy (2002)+

* Returns for male casual wage workers. Lower and upper secondary combined (HS=4) + Estimates for male rural wage workers

While the pattern is similar, the size of the returns in this research are significantly lower than estimates in Aslam et al (2012) and Duraisamy (2002). This can in part be explained due to the sampling methods employed: while this research specifically targeted people employed in the informal sector, the aforementioned studies provide returns to wage workers in formal employment. As suggested in the literature review the contention of this dissertation is that such approaches ignore the low returns to education for those in informal work. Dutta (2006) who provides a set of returns to casual workers, finds low returns at all levels, and that returns decrease from primary school onwards, including negative returns to middle school (upper primary).

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This comparison section serves to highlight the importance of expanding the current line of research: like Dutta this dissertation strongly suggests varied rates of return between workers in the formal and informal sectors. If the rate of return to education affects private investment decisions (Mincer 1974) then understanding how RORE varies between the formal and informal sector is of vital importance to education economists. Furthermore, if RORE estimates are used to decide education spending (Le, Gibson, and Oxley 2005), and if education is a major component of the global strategy to eradicate poverty (ESCAP 2006; UNESCO 2012), then understanding how education affects financial wellbeing for informal workers who are often those living in poverty must be of priority.

Village effects

Weir and Knight (2006) find results of limited private returns coupled with large returns to neighbourhood schooling improvements for Ethiopian farmers, which parallel the large returns to village education seen in the findings. This is explained through the positive externalities of education: the community in general benefits from an individuals increased education. The authors interpret this phenomenon as the result of local farmers copying the innovations of the more educated. This may explain the very large returns to village increases in average education: more educated members of the population innovate to gain a competitive advantage, while those with less education copy as much as they can. This explains both the high returns to village education which results from the spill-over effects of the more educated innovating, as well as the comparatively low private returns since the less educated are able to copy innovations and close the gap.

Such a finding is important to put the low private returns into perspective from a social investment perspective. As well as the potentially large non-market benefits of education to individuals and society (McMahon 2002), the finding implies significant market externalities to raising the average education level within a community. Bennell (1996) finds that social returns to education are often larger than private returns, and cautions against using private RORE estimates for government

74

investment decisions.

5.4

Policy considerations at the local level

Colclough, Kingdon and Patrinos (2009) and Glenwe (1996) caution against interpreting low private returns as motivation to reduce public spending at a particular level. The authors suggest that if low returns are the result of low quality then evidence of low returns can be a signal to increase, not decrease investment. The director of VESS17 suggested that low educational quality was a significant problem in government schools catering to fishing communities. Limited resources, a lack of government monitoring and low teacher motivation have led to fishing communities underperforming at the regional level. Dutta (2006) has suggested dropout rates are an indication of low school quality and this was indicated to be the case amongst the fishing community by the director of VESS.

The role then of research into the returns to education is to direct improvements in education policy, rather than to direct funding. The results of this dissertation suggest that education during lower primary schooling does have a productivityenhancing and poverty-reducing role. The results imply that beyond this level education is not currently helping the fishing community. One regularly repeated suggestion during the interview stage was for greater use of technical or vocational training and a move away from strictly academic schooling. Kalirajan and Shand (1985) find that non-formal schooling has a greater impact on productivity amongst Indian farmers than years of formal schooling. McGrath et al (1994) highlight the controversy around the vocationalisation of education as a response to the expansion of the informal sector. While there is not sufficient space to enter such a broad debate the evidence presented here suggests a less exclusively academic schooling system may have benefits.

The president of KFDWC highlighted previous failures to introduce adult technical

17

An educational NGO

75

training, stating that once fishermen began working they did not have the time to invest in further training. Given the low opportunity costs at school, and the seeming failure of the current system to provide adequate preparation beyond basic education, there is support for introducing vocational elements into the formal curriculum in fishing communities.

This research has highlighted the importance of placing private returns within the context of social returns; as a relative value private return may remain low while wellbeing and raw earnings increase. Research that fails to make this link may underestimate the real value of publicly-funded education, and in marginalised communities the social returns may be significant and more than justify public policy. The finding of large externalities to education at the village level is a strong indication of the role of education in poverty-reduction for informal workers, providing support for greater investment. The potential benefits of raising the education level of Kaikkara to that of Mampilly (2.58- 5.22) would be a near 100% increase in earnings. Such a disaggregated approach is important to estimating the returns to education beyond the strict and incomplete measure of private earnings.

The evidence of large returns to the informal determinants imply that whilst education alone cannot raise fishermen in Kerala out of poverty when combined with technology and the opportunity to own the means of production education can indeed bring sizeable returns. Understanding the role of education within a multisectoral approach to development for Keralas fishing communities is an important step to eradicating poverty, and represents a major contribution of this research.

5.5

Implications for theory

what difficulties arise in calculating rates of return for informal workers and what are important considerations for future research?

76

Research question three is concerned with informal rates of return more generally, reflecting on the research methodology and moving away from the specific findings on Kerala. This research has demonstrated the sensitivity of the Mincer equation to two factors that might be seen to differ markedly between the formal and informal sectors: working hours and experience-earnings profiles.

This dissertation has shown in a unique sensitivity test that the specification of hourly or daily wages has a significant impact on the RORE estimates. This may be particularly salient to informal workers who are likely to have physical jobs such as farming, construction or fishing. If the purpose of investment in education amongst the poor is to increase total income and escape poverty then it is important to capture the real-world benefit, rather than a strict measure of hourly productivity.

Accurate measurement of experience is important given the downward bias when experience is measured with error, especially when returns to informal workers are likely to be low. The need for accurate experience profiles belies the simple proxy of age and calls for more accurate data collection, or the use of specific surveys rather than relying on national census data.

Technology, ownership and credit

This dissertation has identified a number of variables that the researcher feels are important considerations in any future research on RORE in the informal sector. Table 5.2 summarises the coefficients and t-values of each of the four informal determinants identified through the literature review and interview phase. As highlighted below these findings are consistent with existing literature on the informal sector and the returns to education.

This dissertation has shown that in informal enterprises that pay a portion of profits, and thus provide fluctuating earnings rather than fixed contracts, technology is a key determinant of individual earnings. Controlling for all other variables upgrading from non-mechanised to mechanised crafts has an earnings premium of 62%, while the

77

use of GPS is also seen to increase log earnings by 27%. Such findings accord with literature on workers in agriculture that suggest significant financial benefit to technological uptake (Jamison and Lau 1982; Weir and Knight 2006).

Table 5.2

Informal determinant coefficients Coefficient T-test 3.57 6.07 8.26 1.61 P>t 0.002 0.000 0.000 0.125

Craft Type Use of GPS Log of capital stock Loan in last year

.6262138 .2660215 .0485815 .1183651

An increase in 1 log of capital investment equates to an increase of close to 5% in log earnings. As the average logarithm of capital investment was 13 this equates to a 65% premium from ownership of the means of production. Ownership and the role of capital investment is also shown by Aslam et al (2012) to significantly reduce the schooling coefficient for the self-employed in the farming industry, implying that it may be a significant determinant of earnings for informal workers more generally.

Every boat owner in the survey had taken a loan from an official source in the last twelve months to help fund capital investment. The average capital investment amongst owners was 595,500 rupees, while the average loan size was 187,286. This finding implies that access to credit is an important determinant of productivity, and thus earnings for both owners and crew. This is an undeveloped but interesting field: the role of microfinance and credit as a source of poverty alleviation is much discussed in development literature (see Banerjee and Duflo 2011) but has been excluded from any estimation of rates of return.

The reduction in returns using the augmented specification suggests significant omitted variable bias in the basic model. Even after accounting for social

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determinants a large amount of wage determination remains unexplained. The inclusion of each off the four variables discussed above reduces the schooling coefficient while increasing the explanatory power of the model. The regression figures, combined with the high Cramer-V results imply that these variables are strongly associated with earnings and that their inclusion is an important considerations for future research in this area.

Difficulties and Concerns

The results chapter highlighted the difficulties of controlling for capital investment when calculating returns for the self-employed (an important component of the informal sector). These challenges are not however insurmountable: more accurate recording of loan repayments would enable true net earnings to be estimated. What these issues do however suggest is that calculating RORE for workers both selfemployed and causal wage earners within an informal industry requires significant contextual knowledge and far more data than is traditionally available in national surveys.

Extending this research to other fishermen in Kerala would require the inclusion of a broader range of wage determinants. The relative strength of infrastructure and presence of cooperatives would need to be accounted for. The KFDWC intends to build a refrigerated storage unit for members within the next three years. Such a project would allow fishermen to store fish during the monsoon season raising prices (which currently drop due to supply exceeding demand) and ensure more regular profits in the low season. This is an example of the complex system of factors influencing earnings that could influence estimations of the returns to education.

Attempts to broaden this research into other informal industries are even more complicated. The nuances of wage determination must be investigated and incorporated into any such research. This dissertation has provided evidence of the importance of capital, credit and technology in fishing, factors suggested as significant in literature on the informal sector more generally. The specific design of

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the survey would need to be modified; however the research suggests that focusing on these informal determinants in future work may help provide more accurate measures of the return to education for informal workers.

This research demonstrates the importance of local context in the informal sector highlighted in the literature review. Industry-wide studies may be feasible with sufficient care; however the research implies that national-level data would be nearly impossible to generate except through meta-analysis of complementary industry studies. The complexity of the earnings determinants and the extensive data requirements for RORE estimates amongst informal workers belies the simplicity offered by national surveys and the standard Mincer equation.

5.6

Methodology: Issues and limitations

Ability Bias Ability bias is a potential form of endogeneity in RORE estimates: the error term () supposedly captures the unobserved individual effects on earnings; however, if these individual effects also influence schooling decisions schooling is endogenous (Harmon et al 2003: 119). The concern is that more able people stay in school longer, suggesting that wage premiums interpreted as the return to human capital investment may in reality be returns to innate ability. Harmon et al suggest using IQ tests to control for innate ability, unfortunately resource limitations made this approach impossible. The effect of such endogeneity will be an upward bias in the estimates: the supposed return to schooling will be in-part capturing the effects of the error term. Card (cited in Harmon et al 2003) using twin data suggests ability accounts for less than 10% of the return to education in estimates that lack such controls. It should also be noted that while including such controls would greatly improve the model the comparable studies by Duraisamy (2002) and Dutta (2006) in India also suffer from such bias.

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Benefits of Education

This study has focused exclusively on the economic benefits to increased schooling, in keeping with the traditional focus of HCT. McMahon (2002) suggests that nonmonetary benefits to education exceed financial benefits, implying that the private returns estimated here may be underestimations of the total return to schooling. If the lower primary years have low private economic returns they may nonetheless be highly influential in increasing non-market benefits. Combined with the potential for significant market and non-market externalities, private non-market benefits are likely to change the size and pattern of returns to education. While difficult the inclusion of non-market benefits is an important area for future work, and may be particularly prevalent to informal workers who are often the poor and indigent.

Scale

Resource constraints necessarily restricted the scope of this research. This was a necessary trade-off given the aim and uniqueness of the project; one conducted very much as a pilot study concerned with relatability and thoroughness rather than with generalising findings. While not possible to extrapolate the estimated returns beyond the sample the findings imply significant differences between informal and formal workers that point to future avenues of research.

5.7

Future Research

One future area of research would be simple repetition. To improve the credibility of the results the survey should be repeated in different fishing communities and the results cross-checked. Extending the research to females within the same community is another area replete with potential. As vendors rather than harvesters females operating in the fishing industry are likely to face different wage determinants as well as gender barriers. While impossible to pursue in this dissertation the variance in male and female earnings and the potentially different determinants would provide

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further valuable insight into the nature of RORE for informal workers.

The potentially significant roles played by owner education and especially village education are further areas for future research. Along with understanding nonmarket benefits the ability to understand how education externalities operate in the informal sector is important to designing effective education interventions. Further research is needed into the role played by credit as an informal determinant and how this impacts education returns in different industries.

This dissertation has extended work by Aslam et al (2012) into the role of ownership and capital on RORE calculations by exploring the part played by credit in financing investment. This research finds evidence that credit is a significant factor in informal sector productivity, however more research is needed into the role played by risk and whether these findings are repeated in alternative locations and industries.

Finally, another approach would be the application of a similar design to alternative industries, or, with sufficient resources, across multiple industries. This would show the degree to which the informal determinants identified in this research might be considered truly representative of the informal sector as a whole. Given the difficulties previously suggested in such a cross-industry study such research may provide a more flexible instrument than this research design, which is limited to identifying determinants for fishermen.

5.8

Summary

This chapter has presented a detailed discussion of the results reflecting on the research questions in relation to the wider RORE literature. A number of explanations have been offered for the negative returns to education beyond basic education. It has also been shown that this pattern and the size of returns accords with recent Indian literature. Caution has been advised in interpreting the RORE as motivation for redirecting funding, with greater emphasis given to the use of the data for directing

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improvements in quality.

Implications for theory and the role of the Mincer equation in calculating informal RORE were then discussed. This research has highlighted a number of important factors for the specification of future research, and presented key considerations and issues for any such work. A number of limitations and issues in the research design have been highlighted, and their potential impact on the findings suggested. Lastly directions for future research have been suggested that build on the findings of the empirical research.

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Conclusion
This dissertation has three research questions as follows:

1-

which factors are key determinants of productivity in the informal sector, with particular emphasis on fishermen in Kerala?

2-

what is the private rate of return to education for fishermen in Kerala?

3-

what difficulties arise in calculating rates of return for informal workers and what are important considerations for future research?

Research question one was answered through a combination of the literature review and the results of the interviews used to select appropriate variables for inclusion in the survey schedule. Technology, capital investment and access to credit were subsequently identified as key determinants of productivity for fishermen in Kerala. These findings were confirmed in the results of the survey, which showed clearly that these factors contributed greatly to variance in wage distribution. The research suggests that these variables will remain important wage determinants across the informal economy and are important inclusions in any future research. Equation 5 is the preferred specification and the research shows including informal determinants significantly improves the Mincer equation when investigating RORE in the informal sector. The preferred Mincer specification reduced the schooling coefficient dramatically for all levels, implying that the simple model overestimates returns.
ln W S E E 2 X D

(Equation 5)

Research question two was answered using the regression depicted in equation 5. The results show that the rate of return to education varied across school levels and demonstrate that fishermen in the survey have private incentives to invest in education for the first five years of schooling. The average internal rate of return for

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the first five years of school is 2.7%, but fishermen in the sample have no private incentive to invest in education at upper primary or high school level. Returns at each of these levels is negative compared to completing basic education. There is a very strong correlation between improvements in village education and earnings, implying that education may have significant externalities and spill-over effects. Such social returns suggest that the low private rate of return does not capture the full benefit from publicly funded education of the fishing community.

In attempting to provide such estimates the researcher was faced with significant data requirements only feasible through detailed surveys, rather than national census data. Furthermore, given the idiosyncrasies of informal industries the research design used in this dissertation could be modified, but not used wholesale when researching alternative industries. A number of considerations for future research employing a similar design were emphasised, such as the need to accurately control for loan repayments, innate ability and the sensitivity of Mincer regressions to the specification of earnings and experience.

The overarching aim of this project is to further an understanding of how appropriate the Mincer wage equation is as a methodology for calculating rates of return to education in the informal sector. The results suggest that with accurate, detailed information the Mincer wage equation can be used to estimate returns to education for informal workers. The preferred specification was seen to reduce omitted variable bias and explain more than 80% of wage variation in the sample population. In the current academic and policy environment in which rates of return estimates are produced almost daily and are increasingly influential in decision-making (Heckman et al 2008) the major contribution of this dissertation is to demonstrate that estimates of the return to education for informal workers using the Mincer model are a feasible and a necessary focus for education economists.

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Sector Statistics. Delhi: Government of India, February 2012 NSS (2012) Report on Participation and Expenditure in Education: NSS 64th Round. Thiruvananthapuram: Government of Kerala Onaliyan,D., and Okemakinde, T. (2008) Human Capital Theory: Implications for Educational Development. Pakistan Journal of Social Sciences, 5 (5), pp.479483 Palmer, R. (2008) Skills and Productivity in the Informal Economy. Employment Working Paper No.5. Geneva: ILO Psacharopoulos, G. (1994) Returns to investment in education: A global update. World Development, 22 (9), pp.1325-1343 Psacharopulos, G., and Patrinos, H. (2004) Returns to investment in education: a global update', World Development, 22 (9), pp.1325-1343 Psacharapolous, G., and Woodhall, M. (1985) Education for Development: An Analysis of Investment Choices. London: Oxford University Press Riley, J. (1979) Testing the Educational Screening Hypothesis. Journal of Political Economy, 87 (5), pp. S227-S252 Robeyns, I. (2006) Three models of education: Rights, capabilities and human capital. Theory and Research in Education, 4 (1), pp. 69-84 Robson, C. (2011) Real world research: a resource for users of social research methods in applied settings (Third Edition). Chichester: Wiley Romer, P. (1994) The Origins of Endogenous Growth. Journal of Economic Perspectives, 8 (1), pp.3-22 Rose, R & Jament, J. (2012) Communities taking control of the educational inclusion agenda - a small scale initiative in assessing challenges associated with social and economic change in an Indian Fishing Community. Paper presented at European Educational Research Association, Cardiz, Spain September 12-16, 2012. Ruttan, L. and Tyedmers, P. (2007) Skippers, spotters and seiners: Analysis of the skipper effect in US menhaden purse-seine sheries. Fisheries Research, 82, pp.73-80 Sapsford, R. (2007) Survey Research (Second Edition). London: Sage Schneider, F. (2002) Size and Measurement of the Informal Economy in 110 Countries Around the World. Paper presented at Workshop of Australian

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National Tax Centre, ANU, Canberra, Australia, July 17, 2002 Schultz, T. (1971) Investment in Human Capital: The Role of Education and of Research. London: Collier-Macmillan Schwandt, T. (2001) Dictionary of qualitative inquiry. London: Sage Tashakkori, A and Teddlie, C. (1998) Mixed methodology: Combining qualitative and quantitative approaches. London: Sage Tashakkori, A and Teddlie, C. (2003) Handbook of mixed methods in social and behavioral research. London: Sage Taymaz, E. (2009) Informality and Productivity: Productivity Differentials between Formal and Informal Firms in Turkey. ERC Working Paper. Ankara: ERC. Retrieved from http://www.erc.metu.edu.tr/menu/sayfa.php? icerik=09_01&lang=eng&nav=yes (Accessed on 23/07/2013) Tsang, M. (1987) The impact of underutilization of education on productivity: a case study of the U.S. Bell companies. Economics of Education Review, 6 (3), pp. 239254 UNESCO (2012) Education For All Global Monitoring Report 2012. Paris: UNESCO World Bank (2011) Turkey- Improving Conditions for SME Growth Finance and Innovation. Washington: World Bank World Bank. India Data Bank. Retrieved from http://data.worldbank.org/country/india (Accessed on 19/07/2013) Wright, D. (1997) Understanding Statistics: An Introduction for the Social Sciences. London: Sage

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Appendices

Appendix 1

Table A1 The positivism-constructivism paradigm

Positivism Ontology Epistemology

Constructivism

Single reality

Multiple, constructed realities Separation of knowledgeKnowledge and researcher and researcher inseparable Inquiry as value-free Inquiry as value-bound

Axiology Generalizations

Generalizations are free ofAll generalizations bound by time and context time and context Cause as distinct from effectImpossibility of separating cause from effect

Causality

Based on Tashakkori and Teddlie (1998: 7-11).

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Appendix 2: Interview Consent form

Researcher Contact Details: Joseph Collins jcollins01@ioe.ac.uk Institute of Education, London, UK Sponsor Organisation: Kaikkara Fishermen Development Welfare Co-Operative Society Mampilly, Kerala, India

Project Description: This research hopes to explore the financial benefits of education in the local fishing community. This interview will ask you a number of questions about the local community, education and the lives of fishermen. I hope to understand what factors you feel are most important to the earnings of artisanal fishermen. You have been selected to be interviewed as you have a specific expertise I think is important for the research. I would like to use the results of this interview to design a survey to be conducted with local fishermen in the following weeks. Any information you provide will be confidential, and if you agree it can be used it will be stored anonymously. Your information and answers will not be shared with anybody else. If you agree to be interviewed you can stop at any time for any reason. The average results of this research will be shared with the President of KFDWC, but your specific responses will not.

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Please Initial Box

I confirm that the researcher has verbally informed me of the purpose of the above study and that I have had the opportunity to ask questions. I understand that my participation is voluntary and that I am free to withdraw at any time, without giving reason.

I agree to the interview being audio recorded I agree to the use of anonymised quotes in publications I agree to the data collected being used by the researcher for the stated purposes only. I understand it will not be communicated to third parties. I agree to the data collected being stored and understand my anonymity will be protected I agree to take part in the above study.

Name of Participant

Date

Signature

For researcher:

_____________________ Date

__________________________ Signature

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Appendix 3: Interview Schedule

Researcher Contact Details: Joseph Collins jcollins01@ioe.ac.uk Local Partner Organisation: Kaikkara Fishermen Development Welfare Co-Operative Society

Opening Purpose of study: [The purpose of this study is to explore how local factors affect productivity and earnings for workers in Kerala's fishing industry] Intended impact of study: [I will use the data from this interview as well as a survey to be conducted later to survey to measure the impact of education on earnings in the fishing community. While this project is primarily concerned with estimating the impact rather than creating policy to change the situation, I hope the findings will shed light on what can be done in the future to improve Kerala s fishing industry] Reason for interview: [The specific reason I have requested this interview with you is to get your views on what factors affect productivity for artisanal fishermen here in Kerala. My hope is that this interview will give some muchneeded local insight. While I will provide a series of prompts and guides please inform me if you feel the interview fails to discuss something you feel to be very important] Timeline: [This interview should last around 60 minutes and will be audio recorded as outlined in the consent form] Main body: [Let me start by asking you your views on Kerala s fishing industry before we move on to hopefully discuss specific factors that might influence productivity in the industry.] State of fishing industry in Kerala 1a) What is the normal working life of a fisherman? b) What is an average weekly salary for a fisherman? c) How does this compare to other workers, such as farmers or wage earners such as teachers? d) Are artisanal fishermen in Kerala working productively, or could they produce more fish if certain factors could be changed?

2-

What factors influence or change the productivity and earnings of fishermen here in Kerala (other than the weather and fish stocks) ?

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[At this stage I would like to highlight several factors that the economic literature has suggested may greatly affect productivity and ask your opinion on their relative importance] Education and Earnings [Many writers have suggested that education is a key way to raise productivity, the following questions refer to the level of schooling amongst fishermen and the impact you perceive education level has] 3a) What level of education do most fishermen have (yrs of school)? b) Apart from school do fishermen have access to other forms of formal education such as adult workshops? c) Do better-educated fishermen earn more/catch more fish? d) If yes, why do you think that is the case? e) Do you believe more schooling would help future fishermen in Kerala to become more productive and earn more money?

Technology and Earnings [Technology is another factor often suggested to improve productivity in workers. The following questions will explore the technological advances and barriers in Kerala] 4a) Do most fishermen in Kerala have access to technology (such as advanced building materials and outboard engines)? b) Are fishermen with such access to technology more productive? c) Do most fishermen have access to mobile phones? c) What other technology do you believe would allow fishermen to either catch more fish, or sell their existing catch at higher prices?

Credit Availability and Earnings [The ability to get credit is often seen as an important to building a successful business. This section will look at access to credit in Kerala and the impact such loans, or lack of them, has on future productivity] 5a) Is access to credit a problem for artisanal fishermen? b) Are fishermen with access to credit more productive? c) If yes, why? d) Do you think fishermen are capable of investing available credit well and increasing productivity? e) What are existing loans often used for?

Cooperatives and community action [In this section you will be asked to consider the importance of community action and cooperatives for increasing productivity and earnings for fishermen] 6a) Do most fishermen in Kerala belong to cooperatives?

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b) Does belonging to a cooperative help fishermen i) catch more fish, ii) earn more from their existing catch? c) If yes, why? d) If no, why do fishermen join them?

7-

a) Do most fishermen have direct links to a local market? b) Does this influence their earnings?

Tax 8a) Do most fishermen in Kerala pay taxes on their earnings? b) Is corruption an issue present in the industry?

Government Policy 9a) What government policies/incentives/subsidies help fishing productivity the most? b) Are there any government policies hurt fishing productivity? c) What changes to government policy, if any, could you recommend that would improve fishermen productivity?

Tourism 10a) Has the increase in local tourism meant higher earnings for fishermen? b) If yes, in what way? Conclusion 11a) Of the factors addressed in this interview which ones do you feel are most important for fishermen in Kerala? b) If you could identify one intervention/action to improve the productivity and earnings of fishermen in Kerala what would it be?

Closing [That concludes the questions in the interview schedule. Thank you very much for your time and the highly informative answers given. Is there anything else you feel would be helpful for me to know regarding productivity amongst fishermen here in Kerala?]

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Appendix 4: Survey Consent Form

Researcher Contact Details: Joseph Collins jcollins01@ioe.ac.uk Institute of Education, London, UK Sponsor Organisation: Kaikkara Fishermen Development Welfare Co-Operative Society

Project Description: This research hopes to explore the financial benefits of education in the local fishing community. I hope to understand what factors are most important to the earnings of artisanal fishermen.

This survey will ask you a number of questions about your education, earnings and borrowing. If you agree to be interviewed you can stop at any time for any reason. I would like to use the results of this survey to measure the impact of education on earnings in the fishing community.

If you agree it can be used any information you provide will be confidential, and will be stored anonymously. Your information and answers will not be shared with anybody else. The average results of this research will be shared with the President of KFDWC, but your specific responses will not.

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Please Initial Box

I confirm that the researcher has verbally informed me of the purpose of the above study and that I have had the opportunity to ask questions. I understand that my participation is voluntary and that I am free to withdraw at any time, without giving reason.

I agree to the data collected being used by the researcher for the stated purposes only. I understand it will not be communicated to third parties. I agree to the data collected being stored and understand my anonymity will be protected

I agree to take part in the above study.

_______________________________ Full Name

_______________________ Signature

For Researcher

____________________ Date

__________________________ Signature

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Appendix 5: Survey Question List

3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Name Age Marital Status Religion Caste Number of children under 15 Total years of Education Highest level of education (less than primary, completed primary, completed +2, completed degree) Have you had any Post-school Technical Training If YES who provided it? (government, NGO, private) Was your grandfather a fisherman?

14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

At what age did you leave school and start fishing full-time Are you the owner of this boat or a labourer What share of the catch do you receive Is this share before or after costs What is your Average Monthly earning IN season What is your Average Monthly earning OUT of season Number of Hours worked per day Number of days worked per week Have your earnings gone up as much as costs of living in the last decade Do you have Another Job as well as fishing Have you ever had a different job to fishing Have you Ever worked abroad

26. 27.

Do you Always work with the same crew What boat do you use ON season (catamaran, fiberglass with engine)

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28. 29. 30. 31. 32. 33. 34. 35.

What fishing do you do OUT of season (shore seine, catamaran, fiberglass with motor) Do you own a phone Have you taken a loan IN LAST 12 months Who did you Borrowed from How much borrowed What was the money used for Have you Ever owned a boat Are you a Member of a Cooperative, NGO, Union

QUESTIONS FOR THE OWNER 36. 37. 38. 39. 40. 41. 42. 43. 44. Type of boat owned (only this one) (catamaran, fiberglass with motor) was this boat purchased with a loan Total Number of nets used for this boat were these nets purchased with a loan Does this boat use GPS was this purchased with a loan Does this boat use an Echo sounder was this purchased with a loan Total spent on business in last 12 months

45. 46. 47. 48. 49. 50. 51.

Value of this boat (not including motor) Value of motor Value of these nets Value of all technology (GPS, Echosounder) Total number of boats owned Share taken for each boat owned during season Share taken for each boat owned OUT of season

101

Appendix 6: Survey Data Entry Form Date of Interview ___________________ Translation _______ Crew Members Missing ___________

ID

Bo at ID

Village

Name

Age

Marit al Statu s

Religi on

Cast e

Child unde r 15

School Type

Year s of Ed

High Ed level

Postschool Technical Training

For

Provi ded By

Grandf ather fisher man?

1 2 3 4 5 6 7 8 9
10

102

ID 1 2 3 4 5 6 7 8 9 10

Age start ed fishin g

Owner / Worker

Share of Catch

Average Monthly earning in season

Average Monthly earning out season

No Hour s per day

No days per week

Ano ther Job

If yes monthly income

Prev ious job

If yes what

Why left

Ever worked abroad

103

ID

Boat ever damaged by trawler

Always work same crew

Craft on season

Craft out season

Own phone

Ever taken loan

Borrowed from

Amount

Used for

Ever owned boat

Member Cooperative

1 2 3 4 5 6 7 8 9 10

104

ID 1 2 3 4 5 6 7 8 9 10

This Craft Type

purchased with loan

Number nets

purchased with loan

GPS

purchased with loan

Echo sounder

purchased with loan

Total borrowed for business last 12 months

Time to repay

Total spent on business in last 12 months

105

ID 1 2 3 4 5 6 7 8 9 10

Total value of this boat (no motor)

Total motor

value

of

Total value of these nets

Total value of these technology

Total boats owned

Share taken on each boat

Total value of all boats and equipment owned

106 Appendix 7

Table A7

Summary Statistics for Dataset

Variable Age Number of Children Years of Schooling Completed basic schooling (1=yes) Completed compulsory (1=yes) Boat average years of schooling Age started fishing Years of experience Earnings in season (rupees) Earnings off season (rupees) Average yearly earnings (rupees) Average weekly earnings (rupees) Hours per day Days per week Hours per week Daily wage Hourly wage Natural logarithm of daily wages Natural logarithm of hourly wages Craft type (1=OBM) Worker or owner (2=owner) Use of mobile phone (1=yes) Number of nets used GPS used Loan taken in last 12 months (1=yes) Amount borrowed (rupees) Total capital invested in last 12 months Total value of stock

Mean 40.86957 1.152174 4.793478 0.5543478 0.0543478 4.793209 13.88043 26.98913 21875 5125 145250 2793 15.32609 5 76.63043 559 36.4 6.253431 3.536511 0.9347826 1.152174 0.75 5.021739 0.8791209 0.2608696 46,326 47,686 96,773

Standard Deviation 10.70095 1.266081 3.385613 0.4997611 0.227945 1.771408 3.147797 11.84283 9663 2185 61536 1183 2.044068 0 10.22034 237 14.5 0.3745065 0.3251737 0.248262 0.3611576 0.4353854 1.14813 0.3277928 0.441515 127,032 140,581 263,108

107 Appendix 8 Table A8 Introducing variables to the simple Mincer equation

Years Schooling .0271141
1.63 ( 0.120)

of

Simple
T (P>|t|)

Categorical variable+ .2588982

1.77 (0.093)

Craft* -

GPS* -

Investment* -

Loan* -

Village* -

F (P>F)* 1.43 (0.2768)

R2* 0.1145

Cramers V -

+ Craft (C)
T (P>|t|)

.0096466
0.76 (0.456)

.1405563
1.27 (0.222)

.7435715
5.29 ( 0.000)

.4494917
4.08 (0.001)

.0435407
11.42 (0.000)

.431345
10.57 (0.000)

-.1038155
-2.23 (0.039)

9.30 ( 0.0005) 4.15 (0.0152) 39.48 (0.0000) 20.28 (0.0000) 1.85 (0.1673) 5.23 ( 0.0069) 3.90 ( 0.0225) 43.38 (0.0000) 43.41 (0.0000) 52.71 (0.0000)

0.3893 0.3295 0.3628 0.3216 0.1470 0.3603 0.3768 0.3831 0.4092 0.8328

0.9126 0.9503 0.9152 0.8336 0.8412 -

+GPS (G)
T (P>|t|) + Invested (I) T (P>|t|)

.0206114
1.75 (0.098)

.265302
3.47 (0.003)

.3556227
2.81 (0.011)

.027529
1.69 (0.108)

.2489186
1.55 (0.139)

.2598485
5.58 (0.000)

+ Loan (L)
T (P>|t|) + Village (V) T (P>|t|)

.0244113
1.35 (0.193)

.2503161
1.60 ( 0.126)

.0308856
3.55 (0.002)

.0233524
1.33 (0.201)

.2472037
1.65 (0.117)

.1925409
1.80 (0.089)

+ C, G
T (P>|t|)

.0153807
1.36 (0.192)

.2181853
2.78 ( 0.012)

-.0706416
-1.58 (0.132)

+C, G, V
T (P>|t|)

.0131301
1.21 (0.242)

.2148259
2.72 (0.014)

.3703752
2.20 (0.041)

.2145717
4.13 (0.001)

+ I, L
T (P>|t|)

.0264365
1.58 (0.132)

.2479883
1.54 (0.141)

-.0953308
-1.65 (0.117)

+I, L, V
T (P>|t|)

.0233495
1.28 (0.218)

.23743
1.44 (0.167) -

.0343552
3.84 (0.001)

.1435033
1.34 (0.197)

+C,G,W,L,V
T (P>|t|)

.0055785
0.92 (0.372)

.1346565
2.88 (0.010)

.6262138
3.57 (0.002)

.2660215
6.07 (0.000)

.0485815
8.26 (0.000)

.1183651
1.61 (0.125)

-.0439063
-1.10 (0.287)

+ Value cited is for completed lower primary school.

* Based on categorical variable specification.

108

Appendix 9

Table A9

Preferred Specification

Variable Below lower primary Lower primary Upper primary High school Experience Experience Village Craft type GPS use Stock investment Loan use Constant F Probability >F R-squared
2

Coefficient .0701098 .1346565 .027191 .0980183 .0021246 .0000273 -.0439063 .6262138 .2660215 .0485815 .1183651 5.229689 52.71 0.0000 0.8328

T-test 1.72 2.88 0.62 1.09 0.45 0.38 -1.10 3.57 6.07 8.26 1.61 28.84

Probability>|t| 0.102 0.010 0.541 0.290 0.658 0.707 0.287 0.002 0.000 0.000 0.125 0.000

109

Appendix 10: STATA do-file neat copy 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 svyset boat_code [pweight=weight], fpc(fpc) poststrata(strata1) postweight(correction) vce(linearized) singleunit(missing) Sum sum schooling experience basic compulsory average_weekly if village == 1 sum schooling experience basic compulsory average_weekly if village == 2 sum schooling experience basic compulsory average_weekly if village == 3 histogram schooling, discrete frequency (start=0, width=1) kdensity ln_daily lowess ln_daily schooling lowess ln_daily experience svy: regress ln_daily schooling experience experience2 svy: regress ln_daily below_LP LP UP HS experience experience2 svy: regress ln_daily schooling experience experience2 craft svy: regress ln_daily below_LP LP UP HS experience experience2 craft svy: regress ln_daily schooling experience experience2 GPS svy: regress ln_daily below_LP LP UP HS experience experience2 GPS svy: regress ln_daily schooling experience experience2 ln_stock svy: regress ln_daily below_LP LP UP HS experience experience2 ln_stock svy: regress ln_daily schooling experience experience2 loan_12months svy: regress ln_daily below_LP LP UP HS experience experience2 loan_12months svy: regress ln_daily schooling experience experience2 village svy: regress ln_daily below_LP LP UP HS experience experience2 village svy: regress ln_daily schooling experience experience2 craft GPS svy: regress ln_daily below_LP LP UP HS experience experience2 craft GPS svy: regress ln_daily schooling experience experience2 craft GPS village svy: regress ln_daily below_LP LP UP HS experience experience2 craft GPS village svy: regress ln_daily schooling experience experience2 ln_stock loan_12months svy: regress ln_daily below_LP LP UP HS experience experience2 ln_stock loan_12months svy: regress ln_daily schooling experience experience2 ln_stock loan_12months village svy: regress ln_daily below_LP LP UP HS experience experience2 ln_stock loan_12months village svy: regress ln_daily schooling experience experience2 craft GPS ln_stock loan_12months village svy: regress ln_daily below_LP LP UP HS experience experience2 craft GPS ln_stock loan_12months village tabulate ln_daily craft, chi2 nofreq V tabulate ln_daily GPS, chi2 nofreq V tabulate ln_daily ln_stock, chi2 nofreq V tabulate ln_daily loan_12months, chi2 nofreq V tabulate ln_daily village, chi2 nofreq V svy: regress ln_daily experience experience2 craft GPS ln_stock loan_12months village svy: regress ln_daily schooling experience experience2 village craft GPS ln_stock loan_12months svy: regress ln_daily owner_ed experience experience2 village craft GPS ln_stock loan_12months svy: regress ln_daily boat_schooling experience experience2 village craft GPS ln_stock loan_12months svy: regress ln_daily village_ed experience experience2 village craft GPS ln_stock loan_12months kdensity ln_hourly kdensity ln_daily svy: regress ln_daily below_LP LP UP HS experience experience2 ln_stock loan_12months village

110

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67

svy: regress ln_daily below_LP LP UP HS assumed_experience assumed_experience2 ln_stock loan_12months village sum average_yearly if worker_owner == 1 sum average_yearly if worker_owner == 2 sum credit_business if worker_owner == 2 svy: regress total_daily below_LP LP UP HS experience experience2 total_stock loan_12months village svy: regress ln_daily below_LP LP UP HS experience experience2 ln_stock loan_12months village if worker_owner == 1 svy: regress ln_daily below_LP LP UP HS experience experience2 ln_stock loan_12months village if worker_owner == 2 tabulate schooling GPS, chi2 nofreq V tabulate basic GPS, chi2 nofreq V tabulate schooling GPS, chi2 nofreq V *estimated using owners only data* tabulate basic GPS, chi2 nofreq V *estimated using owners only data* tabulate schooling craft, chi2 nofreq V tabulate basic craft, chi2 nofreq V tabulate schooling craft, chi2 nofreq V *estimated using owners only data* tabulate basic craft craft, chi2 nofreq V *estimated using owners only data* regress basic GPS regress schooling GPS regress basic GPS *estimated using owners only data* regress schooling GPS *estimated using owners only data* regress basic craft regress schooling craft regress basic craft *estimated using owners only data* regress schooling craft *estimated using owners only data*