Determinant of Households’ Economic in Afghanistan: An Impact of Education on Households’ Income and Income Inequality

Abstract

This empirical research paper explores the correlation between education, income, and income equality at the micro-level. The author used cross-sectional data from the Asia Foundation which was conducted in 2019. This study uses the Mincer equation model and generated numerous regression models in order to investigate the impact of education on household income and income inequality in Afghanistan during 2019. The ordinary least squared regression (OLS), quantile regression, and ordered logistic regression estimation techniques were employed to analyze the effects of education. The findings reveal, according to ordered logistic regression, there is a positive correlation between education and income, meaning, an increase in the education level can increase income as well. Furthermore, ordinary least squared regression results suggest that one level increase in education can predict 2.7 percent higher income. Also, in this study, quantile regression is used to find out whether education increases income inequality or decreases income inequality. The results from quantile regression indicate that education tends to decrease income inequality among Afghan households, however, further studies are needed to have a deeper understanding of the correlation between education and income inequality in Afghanistan.