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Increasing skill premium and education decisions: Higher intra-skilled inequality and lower inter-skill mobility

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  • Joel HELLIER

    (LEM-CNRS, Univ. of Lille, and LEMNA, Univ. of Nantes)

Abstract

This paper analyses the effects of an increase in earnings inequality between skilled and unskilled workers on education decisions and intergenerational mobility, depending on the way higher education is funded. The rise in inequality typically encourages higher education attending, but it also (i) improves the relative position of children from skilled families by reducing inter-skill intergenerational mobility and (ii) fosters inequality across skilled workers (‘intra-skilled inequality’) when higher education is costly. The impact depends on education financing and the only situation in which skilled families are not favoured is when higher education is freely provided. Those results are in line with the developments observed in advanced economies which have experienced a constant increase in their skill premia in the last four decades.

Suggested Citation

  • Joel HELLIER, 2023. "Increasing skill premium and education decisions: Higher intra-skilled inequality and lower inter-skill mobility," Working Papers 643, ECINEQ, Society for the Study of Economic Inequality.
    • Handle: RePEc:inq:inqwps:ecineq2023-643
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2023-643.pdf
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    More about this item

    Keywords

    Education; Inequality; Intergenerational mobility; Skill.;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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