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Could an Increase in Education Raise Income Inequality? Evidence for Latin America

Author

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  • Diego Battistón
  • Carolina García-Domench
  • Leonardo Gasparini
Abstract
This paper explores the direct ef fect of an education expansion on the level of earnings inequality by carrying out microsimulations for most Latin American countries. We find that the direct ef fect of the increase in years of education in the region in the 1990s and 2000s was unequalizing; this result is expected to hold for future expansions if increases in education are not highly progressive. Both facts are closely linked to the convexity of returns to education in the labor market. On average, the estimated impact of the education expansion remains unequalizing when allowing for changes in returns to schooling, although the ef fect becomes smaller.

Suggested Citation

  • Diego Battistón & Carolina García-Domench & Leonardo Gasparini, 2014. "Could an Increase in Education Raise Income Inequality? Evidence for Latin America," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 51(1), pages 1-39, May.
    • Handle: RePEc:ioe:cuadec:v:51:y:2014:i:1:p:1-39
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    3. Fernandez Sierra, Manuel & Messina, Julián, 2017. "Skill Premium, Labor Supply and Changes in the Structure of Wages in Latin America," IZA Discussion Papers 10718, Institute for the Study of Labor (IZA).
    4. Lustig, Nora & Lopez-Calva, Luis F. & Ortiz-Juarez, Eduardo, 2013. "Declining Inequality in Latin America in the 2000s: The Cases of Argentina, Brazil, and Mexico," World Development, Elsevier, vol. 44(C), pages 129-141.
    5. Iva Valentinova Tasseva, 2021. "The Changing Education Distribution and Income Inequality in Great Britain," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(3), pages 659-683, September.
    6. Guillermo Cruces & Gary S. Fields & David Jaume & Mariana Viollaz, 2015. "The growth-employment-poverty nexus in Latin America in the 2000s: Argentina country study," WIDER Working Paper Series 069, World Institute for Development Economic Research (UNU-WIDER).
    7. Guillermo Cruces & Gary S. Fields & David Jaume & Mariana Viollaz, 2015. "The growth-employment-poverty nexus in Latin America in the 2000s: Brazil country study," WIDER Working Paper Series 071, World Institute for Development Economic Research (UNU-WIDER).
    8. Roy, Pronoy & Husain, Zakir, 2019. "Education as a way to reducing inequality: Evidence from India," MPRA Paper 93907, University Library of Munich, Germany.
    9. Shao-Hsun Keng & Peter F. Orazem, 2019. "Performance pay, the marriage market and rising income inequality in Taiwan," Review of Economics of the Household, Springer, vol. 17(3), pages 969-992, September.
    10. Javier Alejo & Leonardo Gasparini & Gabriel Montes-Rojas & Walter Sosa-Escudero, 2024. "A decomposition method to evaluate the ‘paradox of progress’, with evidence for Argentina," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 22(2), pages 453-472, June.
    11. Fa-Hsiang Chang, 2024. "The impact of education costs on income inequality," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 71(3), pages 553-574, September.
    12. Malena Arcidiácono, 2015. "Salario Mínimo y Distribución salarial: Evidencia para Argentina 2003 – 2013," CEDLAS, Working Papers 0192, CEDLAS, Universidad Nacional de La Plata.
    13. Abdulaleem Isiaka & Alexander Mihailov & Giovanni Razzi, 2022. "Reallocating Government Spending to Reduce Income Inequality: Panel Data Evidence from the Middle-Income Countries," Economics Discussion Papers em-dp2022-08, Department of Economics, University of Reading.
    14. Francisco H. G. Ferreira & Sergio P. Firpo & Julian Messina, 2014. "A more level playing field? Explaining the decline in earnings inequality in Brazil, 1995-2012," Global Development Institute Working Paper Series iriba_wp12, GDI, The University of Manchester.
    15. Fernández, Manuel & Messina, Julián, 2018. "Skill premium, labor supply, and changes in the structure of wages in Latin America," Journal of Development Economics, Elsevier, vol. 135(C), pages 555-573.
    16. Carlos Rodríguez‐Castelán & Luis Felipe López‐Calva & Nora Lustig & Daniel Valderrama, 2022. "Wage inequality in the developing world: Evidence from Latin America," Review of Development Economics, Wiley Blackwell, vol. 26(4), pages 1944-1970, November.
    17. Matthieu Clément & Lucie Piaser, 2022. "Geography of Income and Education Inequalities in Mexico: Evidence from Small Area Estimation and Exploratory Spatial Analysis," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(2), pages 703-732, April.
    18. Giovanni Andrea Cornia, 2021. "Latin America's Income Inequality Under five Political Regimes, 1870-2018," Working Papers - Economics wp2021_12.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    19. Huynh, Cong Minh & Le, Quoc Nha, 2022. "A multi-dimensional free market and income inequality in developing Asia: How does the quality of governance matter?," MPRA Paper 112013, University Library of Munich, Germany.
    20. Kirill Borissov & Aleksey Minabutdinov & Roman Popov, 2024. "Ability Distribution and Dynamics of Wage Inequality: Unintended Consequences of Human Capital Accumulation," CER-ETH Economics working paper series 24/393, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    21. Guillermo Cruces & Gary S. Fields & David Jaume & Mariana Viollaz, 2015. "The growth-employment-poverty nexus in Latin America in the 2000s: Argentina country study," WIDER Working Paper Series wp-2015-069, World Institute for Development Economic Research (UNU-WIDER).
    22. Onur Özdemir, 2023. "The determinants of income distribution: the role of progress in human capital," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(5), pages 4193-4227, October.
    23. Guillermo Cruces & Gary S. Fields & David Jaume & Mariana Viollaz, 2015. "The growth-employment-poverty nexus in Latin America in the 2000s: Brazil country study," WIDER Working Paper Series wp-2015-71, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    Education; inequality; earnings; Latin America;
    All these keywords.

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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