Educational attainment as a predictor of poverty and social exclusion: Empirical analysis of Serbian case

This study examines the impact of education on the risk of poverty and social exclusion in a single-country framework. Relying on household and individual level data from the annual EU-SILC survey obtained in Serbia in 2020, we estimate the market and non-market benefits of education in the context of combating poverty and social exclusion in developing countries. Based on a representative sample of the adult population in Serbia, we explore to what extent the risk of poverty and social exclusion can be predicted by the levels of educational attainment. Econometric estimations indicate that educational underachievement acts as a significant driver of poverty and social exclusion. Probit regression analysis indicates that the risk of experiencing poverty and social exclusion decreases substantially with higher education levels. We include three model specifications that calculate the predicted probability of being at risk of poverty, severely materially deprived and exposed to combined risks. Holding other predictors constant, the decrease in poverty and social exclusion probability attributed to a one level increase in educational attainment amounts up to 7.96% (for unemployed women with only primary education). The analysis confirms that the highest gains from schooling are materialized for the categories of respondents who are not active in the labor market and those with the lowest levels of educational attainment. Besides this, self-perceived health and labor market activity significantly affect the risk of poverty, material deprivation and social exclusion. The impact of age differs across our model specifications, indicating that age increases the probability of severe material deprivation and the combined risk of poverty and deprivation, while older age appears to go in hand with a lower risk of poverty itself. These results offer relevant information that should be considered when determining the optimal level of social investment in education.