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Educational Qualifications and Wage Inequality: Evidence for Europe

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Author Info
Santiago Budría () (University of Madeira and CEEAplA)
Pedro Telhado Pereira () (University of Madeira, CEEAplA, CEPR and IZA Bonn)

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Abstract

This paper explores the connection between education and wage inequality in nine European countries. We exploit the quantile regression technique to calculate returns to lower secondary, upper secondary and tertiary education at different points of the wage distribution. We find that returns to tertiary education are highly increasing when moving from the lower to the upper quantiles. This finding suggests that an educational expansion towards tertiary education is expected, ceteris paribus, to increase overall wage inequality through the withindimension. Returns to secondary education are more homogeneous across quantiles, thus suggesting that an educational expansion towards secondary education is expected to have a more limited impact on within-groups dispersion. Using data from the last decades, we assess how the impact of education on wage inequality has evolved over time. We detect different trends across countries. A common feature is that the inequality increasing effect of tertiary education became more acute over the last years.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1763.

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Length: 39 pages
Date of creation: Sep 2005
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Handle: RePEc:iza:izadps:dp1763

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Related research
Keywords: returns to education; quantile regression; wage inequality;

Other versions of this item:

Find related papers by JEL classification:
C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. O. Ben Abdelkarim & A. Skalli, 2003. "Educational and Economic inequality in France. A survey of the Litterature," Working Papers ERMES 0316, ERMES, University Paris 2. [Downloadable!]
  2. De Gregorio, Jose & Lee, Jong-Wha, 2002. "Education and Income Inequality: New Evidence from Cross-Country Data," Review of Income and Wealth, Blackwell Publishing, vol. 48(3), pages 395-416, September. [Downloadable!] (restricted)
  3. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March. [Downloadable!] (restricted)
  4. Pereira, Pedro Telhado & Martins, Pedro Silva, 2000. "Does Education Reduce Wage Inequality? Quantile Regressions Evidence from Fifteen European Countries," IZA Discussion Papers 120, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Daron Acemoglu, 2002. "Cross-Country Inequality Trends," NBER Working Papers 8832, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Hartog, Joop, 2000. "Over-education and earnings: where are we, where should we go?," Economics of Education Review, Elsevier, vol. 19(2), pages 131-147, April. [Downloadable!] (restricted)
  7. Tom Clark & Jayne Taylor, 1999. "Income inequality: a tale of two cycles?," Fiscal Studies, Institute for Fiscal Studies, vol. 20(4), pages 387-408, December. [Downloadable!]
  8. Eswar Prasad, 2000. "The Unbearable Stability of the German Wage Structure - Evidence and Interpretation," IMF Working Papers 00/22, International Monetary Fund.
  9. Machin, Stephen, 1997. "The decline of labour market institutions and the rise in wage inequality in Britain," European Economic Review, Elsevier, vol. 41(3-5), pages 647-657, April. [Downloadable!] (restricted)
  10. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U.S. Wage Inequality: Re-Assessing the Revisionists," NBER Working Papers 11627, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465. [Downloadable!]
  12. Peter Dolton, 2001. "Over education in the graduate labour market: Some evidence from alumni data," CEE Discussion Papers 0009, Centre for the Economics of Education, LSE. [Downloadable!]
  13. Alberto Abadie, 1997. "Changes in Spanish labor income structure during the 1980's: a quantile regression aproach," Investigaciones Economicas, Fundación SEPI, vol. 21(2), pages 253-272, May. [Downloadable!]
    Other versions:
  14. Fersterer, Josef & Winter-Ebmer, Rudolf, 2003. "Are Austrian returns to education falling over time?," Labour Economics, Elsevier, vol. 10(1), pages 73-89, February. [Downloadable!] (restricted)
    Other versions:
  15. Mark Sanders & Bas ter Weel, 2000. "Skill-Biased Technical Change Theoretical Concepts, Empirical Problems and a Survey of the Evidence," DRUID Working Papers 00-8, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
    Other versions:
  16. Hartog, Joop & Pereira, Pedro T & Vieira, Jose A C, 2001. "Changing Returns to Education in Portugal during the 1980s and Early 1990s: OLS and Quantile Regression Estimators," Applied Economics, Taylor and Francis Journals, vol. 33(8), pages 1021-37, June. [Downloadable!] (restricted)
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  17. Harmon, Colm & Hogan, Vincent & Walker, Ian, 2003. "Dispersion in the economic return to schooling," Labour Economics, Elsevier, vol. 10(2), pages 205-214, April. [Downloadable!] (restricted)
    Other versions:
  18. Pereira, Pedro Telhado & Martins, Pedro Silva, 2001. "Is there a Return-Risk Link in Education?," IZA Discussion Papers 321, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  19. José A. F. Machado & José Mata, 2001. "Earning functions in Portugal 1982-1994: Evidence from quantile regressions," Empirical Economics, Springer, vol. 26(1), pages 115-134. [Downloadable!] (restricted)
  20. Giorgio Brunello, 2007. "The Effects of Cohort Size on European Earnings," "Marco Fanno" Working Papers 0036, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Budria, Santiago, 2006. "Schooling and the distribution of wages in the european private and public sectors," MPRA Paper 90, University Library of Munich, Germany. [Downloadable!]
  2. Gernandt, Johannes & Pfeiffer, Friedhelm, 2006. "Rising Wage Inequality in Germany," ZEW Discussion Papers 06-19, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
    Other versions:
  3. Patrinos, Harry Anthony & Ridao-Cano, Cris & Sakellariou, Chris, 2006. "Estimating the returns to education : accounting for heterogeneity in ability," Policy Research Working Paper Series 4040, The World Bank. [Downloadable!]
  4. Corrado Andini, 2007. "A Dynamic Mincer Equation with an Application to Portuguese Data," IZA Discussion Papers 2897, Institute for the Study of Labor (IZA). [Downloadable!]
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