What causes income inequality has always been a very challenging question. In fact, education has been argued to be one of the leading factor influencing income inequality. Though, most researchers agree on the importance of education as a reason, still some theoretical studies question it.
Earlier work from Ram (1989) shows, education is closely related to income distribution in advanced developed countries. Becker and Chiswick (1996) (using panel sets in the United States) suggest a positive correlation between income inequality and inequality in schooling, as well as a negative correlation between income inequality and the average level of schooling. Thus, a more equal education would lead to a greater income equality, whereas a higher average level of education would cause a greater income inequality. The human capital …show more content…
De Gregorio’s paper delivers empirical evidence of the effect of education towards income inequality using cross-country data sets from over 30 years.
He uses additionally data, collected by Deiniger and Squire (1996) and Barro and Lee (1996), to construct a new set of panel data. It contains data from over 100 countries on educational attainment and income distribution in five year intervals from 1960 to 1990. This allows him to investigate closely the relationship between education and income inequality at different time periods and on a cross-national level.
In the following sections, the findings of how average schooling influences income distribution will be examined. The determinants of educational level and its inequality across countries, detailed results of the cross-sectional findings, long-term effects of changes in education on income distribution, and lastly, conclusions will be presented.
II. The Effects of Education on Income
Earlier work from Ram (1989) shows, education is closely related to income distribution in advanced developed countries. Becker and Chiswick (1996) (using panel sets in the United States) suggest a positive correlation between income inequality and inequality in schooling, as well as a negative correlation between income inequality and the average level of schooling. Thus, a more equal education would lead to a greater income equality, whereas a higher average level of education would cause a greater income inequality. The human capital …show more content…
De Gregorio’s paper delivers empirical evidence of the effect of education towards income inequality using cross-country data sets from over 30 years.
He uses additionally data, collected by Deiniger and Squire (1996) and Barro and Lee (1996), to construct a new set of panel data. It contains data from over 100 countries on educational attainment and income distribution in five year intervals from 1960 to 1990. This allows him to investigate closely the relationship between education and income inequality at different time periods and on a cross-national level.
In the following sections, the findings of how average schooling influences income distribution will be examined. The determinants of educational level and its inequality across countries, detailed results of the cross-sectional findings, long-term effects of changes in education on income distribution, and lastly, conclusions will be presented.
II. The Effects of Education on Income