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Connecting the unobserved dots : a decomposition analysis of changes in earnings inequality in urban Argentina, 1980-2002

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Demombynes, Gabriel
Metzler, Johannes

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Abstract

There are several possible explanations for the observed changes in inequality, the returns to education, and the gap between the wages of informal and formal salaried workers in Argentina over the period 1980-2002. Largely due to the lack of evidence for competing explanations, skill-biased technical change is the most likely explanation forthe increases in the returns to education that occurred in the 1990s. Using a semi-parametric re-weighting variance decomposition technique and data from the Permanent Household Survey, the authors show that during the same period there was an increase in the returns to unobserved skill. This finding lends support to the hypothesis that skill-biased technical change has been a main driver of increases in inequality in Argentina. The pattern of changes suggests that the growth in returns to unobserved skill may have been partly responsible for the relative deterioration of informal salaried wages during the 1990s.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4624.

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Date of creation: 01 May 2008
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Handle: RePEc:wbk:wbrwps:4624

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Keywords: ; Labor Markets; Access&Equity in Basic Education; Primary Education; Education For All;

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  4. Dinardo, J. & Fortin, N.M. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Cahiers de recherche 9406, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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  6. Pablo Acosta & Leonardo Gasparini, 2007. "Capital Accumulation, Trade Liberalization, and Rising Wage Inequality: The Case of Argentina," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 793-812. [Downloadable!]
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  7. Giovagnoli, Paula Ines & Fiszbein, Ariel & Patrinos, Harry Anthony, 2005. "Estimating the returns to education in Argentina : 1992-2002," Policy Research Working Paper Series 3715, The World Bank. [Downloadable!]
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  10. Gasparini, L C, 2002. "Microeconometric Decompositions of Aggregate Variables: An Application to Labour Informality in Argentina," Applied Economics, Taylor and Francis Journals, vol. 34(18), pages 2257-66, December. [Downloadable!] (restricted)
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  11. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier. [Downloadable!] (restricted)
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