Estimation of Earning Function of Business Graduates in Pakistan

9 Pages Posted: 27 Jan 2007 Last revised: 31 Aug 2008

See all articles by Syed Mohammad Abdullah Khalid

Syed Mohammad Abdullah Khalid

KPMG - Transaction Services; Warwick Business School; IBA

Mohammed Nishat

University of Karachi - Institute of Business Administration (IBA), Karachi

Date Written: 2008


The research paper uses the cross-sectional data of 200 employees working in different industries of Karachi, Pakistan to determine the earning function of business graduates. The paper uses the weighted least square technique to identify the factors influencing the earnings of business graduates. The results indicate that the coefficient of the gender indicates that the salary is independent of the gender of the employee. There is no affect of being married on the salary. The coefficient of living status indicates that the effect of living status is not significant in determining the salary of the employee. An insignificant value of the education status indicates that employees who have done Masters are earning the same as those who have done only Bachelors. The effect of institute is also significant as the results show that better schooling has surprisingly negative impact on the salary. Business graduates have an edge over graduates from other degrees as they get comparatively more. Graduates who have been active in extra curricular activities get less salary than those who were not active in extra curriculum activities. The banking sector pays its employee more than that of the other industries. The results show that the difference in salary between the banking and other industries is significant. Managers get more than the other fellow workers of the company. The employees that receive training by the organization are paid more than others. Companies that are well established and have long running operations do pay significantly more than other companies. Firms that are large in size i.e. have more than 250 employees also maintain the same level of pay for as is followed by other companies. There is a significant difference between the salaries paid by Public limited companies and private limited companies. Employees working on flexible timings do get a significantly more pay than those working on fixed timings. Employees working on contract or part time do not get significantly more than the employees working full time at the company. Age of the employee is an important factor in determining the salary. The age also follows an exponential distribution where every square increase in age will cause an increase in the salary. An employee having more dependents earns higher salary. As one gets more work experience, the salary grows. But surprisingly the empirical findings of our sample are not supportive. The no. of jobs switched also has an effect on the salary of the employee.

Keywords: earning function, Pakistan

JEL Classification: J31, J33, E24, J23, N35

Suggested Citation

Khalid, Syed Mohammad Abdullah and Nishat, Mohammed, Estimation of Earning Function of Business Graduates in Pakistan (2008). Available at SSRN: or

Syed Mohammad Abdullah Khalid (Contact Author)

KPMG - Transaction Services ( email )

London EC4Y 8BB
United Kingdom
01216096150 (Phone)

Warwick Business School ( email )

Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain

IBA ( email )

Karachi, Sindh 75270

Mohammed Nishat

University of Karachi - Institute of Business Administration (IBA), Karachi ( email )

University Road
Karachi, Sindh 75270

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