Implications of Investment in Human Capital on Wealth Redistribution: Evidence from Sri Lanka

Abstract

Using Quarterly Labour Force Survey data, this paper examines two important issues pertaining to human capital theory in the context of Sri Lanka. The conceptual framework of analysis in this paper is the Mincerian earnings function. In the presence of more than one form of investment in human capital, a rational individual would list out all opportunities in a descending order of rate of returns to investment and choose the one with the highest returns. In this paper, rate of returns to schooling and vocational training are estimated and it is found that in terms of financial returns, vocational training to be worth more than schooling. This suggests that rational individuals should choose vocational training over schooling.