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Education, Growth and Income Inequality

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  • Coen N. Teulings

    ()
    (SEO, University of Amsterdam)

  • Thijs van Rens

    ()
    (Department of Economics, Princeton University)

Abstract

Estimates of the effect of education on GDP (the social return) have been hard to reconcile with micro evidence on the private return to schooling. We present a simple explanation combining two ideas: imperfect substitution and endogenous skill-biased technological progress and use cross-country panel data on inequality and GDP to test these ideas. A one-year increase in the level of education reduces the private return by 2 percentage points, consistent with Katz-Murphy's (1992) elasticity of substitution. We find no evidence for reversal of this initial effect as in Acemoglu (2002). In the short run, the social return equals the private return. This discussion paper has resulted in a publication in the Review of Economics and Statistics , 2008, 90(1), 89-104.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 02-001/3.

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Date of creation: 22 Jan 2002
Date of revision: 05 Mar 2003
Handle: RePEc:dgr:uvatin:20020001

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Keywords: education; inequality; growth;

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