The Effects of Human Capital on the Extensive Margin of Female Labour Supply: Evidence from Malawi

This study investigates the effects of human capital on the extensive margin of female labour supply within the framework of the standard theoretical model of labour supply. Our analysis uses pooled crosssectional data from the Malawi 2010-2019 Integrated Household Panel Survey and relies primarily on Maximum Likelihood Estimation (MLE) technique and instrumental variables (IV) approach to estimate the causal effect of human capital on labour supply and to correct for endogeneity of education. Our results confirm the relevance of human capital, as embodied in education and labour market experience in determining women's labour supply in Malawi. Findings from the labour force participation model show that participation generally increases with educational attainment; however, this trend is significantly interrupted by a decline at first-degree level, followed by pronounced improvement at postgraduate level, suggesting a possible frustration or status effects among first-degree holders attributed to unattained expectations in labour markets with a dominant informal sector. Our analysis also reveals weak effect of primary and junior secondary education in influencing women's participation, demonstrating that primary and junior secondary school may be relevant for home production and only higher secondary school and tertiary education are significant in creating labour market opportunities. The study also finds a positive relationship between women's labour force participation and labour market experience up to about 36 years of labour market experience; thereafter, participation is negatively associated with experience. The findings also reveal a striking diminishing complementarity between schooling and labour market experience suggesting that for women with low labour market experience, schooling may have a strong positive effect on participation. However, as experience increases, the marginal benefits of education slightly diminish. In addition, the interaction of education and the number of children for women is negative and highly significant, indicating that the positive effect of education on women's labour force participation weakens as the number of children increases.