The role of education and training in the development of the Malaysian economy

This thesis aims to examine the role of education and training in Malaysia via the analysis of its impact on an individual. To do this, we have used a conventional human capital earnings function. Our findings show that there are positive and high returns to education in Malaysia. Our findings also indicate positive returns to training for a randomly selected group of women extracted from the Malaysian Family Life Survey data sets. This examination on training has been extended to include the determinants of training analysis and we have found that (a) training and education are complements and (b) women tend to be deterred from participating in training if they are credit constrained. The rates of returns to education in Malaysia are updated via the usage of the 1997 Malaysian Household Income Survey data set. The rates of returns to the different levels of

education remain high and positive in Malaysia. We have also been able to form the trends of the returns to education using 6 sets of the Malaysian Household Income Survey data. The returns to education in Malaysia remained stable from 1984 to 1997 with the exception of the tertiary education level, where the returns were increasing over time. In order for the returns to education to be stable over time, the demand for skilled labour must have increased alongside increasing supply of skilled labour. This prediction is confirmed via our demand and supply framework analysis. The results do show that relative demand for skilled labour has increased alongside the rising relative supply of skilled labour. Our results also show that there are higher returns accrued to the higher levels of education, namely at the pre-university and higher education level. This condition of higher returns to higher levels of education is possible given the stages of rapid industrialisation in Malaysia. We conclude this thesis with a brief investigation into how the rates of return estimates can play a more prominent role in the Malaysian skill formation process. This investigation is done with the help of the developmental state skill formation model. We detect a plausible role of the rates of returns to education estimates in the Malaysian skill formation framework. We conclude that the role of education and training in Malaysia has been positive and has the potential to continue doing so