Education, Growth and Income Inequality

• Autores: Thijs van Rens, Coen N. Teulings
• Localización: Working Papers ( Universitat Pompeu Fabra. Departamento de Economía y Empresa ), Nº. 942, 2006
• Idioma: inglés
• Enlaces
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• Resumen

  • Estimates of the e¿ect of education on GDP (the social return to education)have been hard to reconcile with micro evidence on the private return. We present a simple explanation that combines two ideas: imperfect substitution between worker types and endogenous skill biased technological progress. When types of workers are imperfect substitutes, the supply of human capital is negatively related to its return, and a higher education level compresses wage di¿erentials. We use cross-country panel data on income inequality to estimate the private return and GDP data to estimate the social return. The results show that the private return falls by 2 percentage points when the average education level increases by a year, which is consistent with Katz and Murphy's [1992] estimate of the elasticity of substitution between worker types. We find no evidence for dynamics in the private return, and certainly not for a reversal of the negative e¿ect as described in Acemoglu [2002]. The short run social return equals the private return.