Causes, Effects and Solutions to the Eradicating of Illiteracy

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Is Functional Literacy a Prerequisite for Entering the Labor Market? An Analysis of the Determinants of Adult Literacy and Earnings in Ghana

Niels-Hugo Blunch and Dorte Verner

Working Paper 00-05 April 2000

Published by Centre for Labour Market and Social Research Universitetsparken, Building 350 8000Aarhus C, Denmark

Editor: Peder J. Pedersen Copyrights: Niels-Hugo Blunch and Dorte Verner

ISSN 0908-8962

Is Functional Literacy a Prerequisite for Entering the Labor Market? An Analysis of the Determinants of Adult Literacy and Earnings in Ghana

Niels-Hugo Blunch
The George Washington University and World Bank

Dorte Verner
World Bank

JEL Classifications: I21, J31, O12 Keywords: functional literacy, earnings determinants, Ghana, Sub-Saharan Africa

Abstract This article analyzes the determinants of literacy and earnings in Ghana. It links literacy and earnings with a variety of factors, including age, gender, family educational background, distance to school, and income. Literacy and age are negatively correlated, suggesting that efforts at strengthening the supply and quality of basic education programs in recent years have been successful in raising literacy rates. Females are less literate than males, controlling for other factors. Parents’ education is positively associated with literacy. Distance to the nearest primary school, residency in a rural area, and poverty affect literacy negatively. Functional literacy appears to be a prerequisite for entering the labor market, which may partly explain the lack of return to education other than middle school and technical/professional training. The policy implication of the study is that basic education and literacy programs should target females and poorer households, especially in rural areas.

We would like to thank Rosemary Bellew and Helena Ribe for invaluable support. We are also indebted to Rocio Castro; Ronald Ehrenberg; Nicolai Kristensen; our discussant, Nabanita Datta Gupta; and the other participants at the conference on the Economics of Education and Human Capital, held by the Centre for Labour Market and Social Research and the Aarhus School of Business, Denmark, in June, 1999, for helpful comments and suggestions. The views expressed here are those of the authors and should not be attributed to the World Bank or any of its member countries. Addresses: Department of Economics, The George Washington University, 2201 G Street, NW, Washington, DC 20052, USA and World Bank, 1818 H Street, NW, Washington, DC 20433, USA. E-mail: nblunch@worldbank.org, dverner@worldbank.org.

1. INTRODUCTION Significant and rapid increases in earnings and education have taken place over the past hundred years in industrial economies. In developing economies the picture is different: High illiteracy rates and very low incomes, and thus widespread poverty, are realities for large parts of the world. Literacy and income are closely linked. Establishing and assessing the nature of these links may help increase both literacy rates and earnings, thereby eradicating poverty. In this article, we analyze the determinants of literacy and earnings in Ghana based on two household surveys. Our results link literacy and earnings with a variety of factors, including age, gender, family educational background, distance to school, and income. Literacy and age are found to be inversely correlated, implying that younger generations are more literate than older generations. This relationship indicates that recent efforts to strengthen the supply and quality of basic education programs have been successful. Females are found to be less literate than males, controlling for other factors. Parents’ education is positively correlated with their children’s literacy. Distance to the nearest primary school and residency in a rural area, are negatively correlated with literacy rates. Poverty and literacy are also negatively correlated. Our analysis of the determinants of earnings...
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