Earnings function: An emperical analysis of education and earnings in Himachal Pradesh

This pape is an attempt to apply the familiar human capital theory to the data of Mandi district of Himachal Pradesh in order to examine the influence of two important variables of human capital viz education and experience on the individual earnings. The earnings function is estimated with the help of the methodology as suggested by Mincer (1974). This study has also computed the approximate earnings premium associated with the different levels of education. The empirical evidences clearly shows that the earnings functions have been well represented by the functional relationship in which education (as measured by number of years of schooling), experience and experience squared were the elements. The results of this paper suggest that, a complete model with both the human capital variables and family background variables have explained a substantial portion of the variance in earnings with the available data. There are evidences to show that a higher premium to schooling is associated with higher level of education followed by secondary and elementary levels. In this backdrop, the findings in this paper suggests that the government need to initiate special efforts to increase educational investment planning in Himachal Pradesh in order to increase the educational level and earnings of people.