Income Inequality and Education Revisited: Persistence, Endogeneity, and Heterogeneity

Abstract

This paper presents new results on the relationship between income inequality and education expansion-that is, increasing average years of schooling and reducing inequality of schooling. When dynamic panel estimation techniques are used to address issues of persistence and endogeneity, we find a large, positive, statistically significant and stable relationship between inequality of schooling and income inequality, especially in emerging and developing economies and among older age cohorts. The relationship between income inequality and average years of schooling is positive, consistent with constant or increasing returns to additional years of schooling. While this positive relationship is small and not always statistically significant, we find a statistically significant negative relationship with years of schooling of younger cohorts. Statistical tests indicate that our dynamic estimators are consistent and that our identifying instruments are valid. Policy simulations suggest that education expansion will continue to be inequality reducing. This role will diminish as countries develop, but it could be enhanced through a stronger focus on reducing inequality in the quality of education.

Macroeconomics, sharia, and economic inequality in The Organization of Islamic Cooperation (OIC): An empirical study

“…However, it is a different matter for countries in Asia, the increase in human capital is the cause of widening inequality. This is different from the findings of Coady & Dizioli (2017) and Wang & Li (2017) that human capital by proxies for school level and proxies for the average length of schooling has a positive but small effect and is not always statistically significant (Munir & Kanwal, 2020). On the other hand, the increase in income inequality caused by an increase in human capital is due to the imbalance in education received by the community (Mahmooda & Noorb, 2015).…”

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“…17 A study byMincer (1958) pointed out that income inequality tends to increase, among others, with age and education Chiswick (1968). noted the positive relationship between average level of schooling and income inequality, with a similar finding, particularly in advanced economies, byCoady and Dizioli (2017). http://aef.redfame.com AppliedEconomics and Finance Vol.…”

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“…Mniej jednoznaczna relacja występuje w przypadku nierówności dochodowych i edukacji. W badaniach panelowych ekspansja edukacji jest równocześnie wskazywana jako mająca pozytywny wpływ na równość dochodów [Lee, Lee, 2018] oraz negatywny -zwłaszcza w perspektywie długookresowej [Makhlouf, Lalley, 2023], co wynika głównie ze współtowarzyszących nierówności edukacyjnych dotyczących zwłaszcza gospodarek wschodzących i rozwijających się [Coady, Dizioli, 2017]. Jednak związek ten może być zróżnicowany również na poziomie badanych kohort.…”