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Education, Growth and Income Inequality

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Author Info
Coen N. Teulings () (SEO, Universiteit van Amsterdam)
Thijs van Rens (Department of Economics, Princeton University)

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Abstract

When types of workers are imperfect substitutes, the Mincerian rate of return to human capital is negatively related to the supply of human capital. We work out a simple model for the joint evolution of output and wage dispersion. We estimate this model using cross-country panel data on GDP and Gini coefficients. The results are broadly consistent with our hypothesis of diminishing returns to education. The implied elasticity of substitution fits Katz and Murphy's (1992) estimate. A one year increase in the stock of human capital reduces the rate of return by about 2%. The combination of imperfect substitution and skill biased technological change closes the gap between the Mincer equation and GDP growth regressions almost completely.

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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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Find related papers by JEL classification:
E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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  1. Heckman, James & Matzkin, Rosa & Nesheim, Lars, 2003. "Simulation and Estimation of Hedonic Models," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  2. James J. Heckman & Rosa Matzkin & Lars Nesheim, 2003. "Simulation and Estimation of Nonaddative Hedonic Models," NBER Working Papers 9895, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Miguel Portela & Rob Alessie & Coen Teulings, 2004. "Measurement Error in Education and Growth Regressions," Tinbergen Institute Discussion Papers 04-040/3, Tinbergen Institute, revised 24 Nov 2005. [Downloadable!]
    Other versions:
  4. Robert A.J. Dur & Coen N. Teulings, 2001. "Education and Efficient Redistribution," Tinbergen Institute Discussion Papers 01-090/3, Tinbergen Institute, revised 12 Jun 2003. [Downloadable!]
    Other versions:
  5. Robert A.J. Dur & Coen N. Teulings, 2003. "Are Education Subsidies an Efficient Redistributive Device?," Tinbergen Institute Discussion Papers 03-024/3, Tinbergen Institute, revised 19 Sep 2003. [Downloadable!]
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  6. Robert A. J. Dur & Amihai Glazer, 2005. "Subsidizing Enjoyable Education," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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