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Educational and income inequality in Europe, ca. 1870–2000

Author

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  • Péter Földvári

    () (Utrecht University, Utrecht, The Netherlands)

  • Bas van Leeuwen

    (Utrecht University, Utrecht, The Netherlands)

Abstract

In this paper, we revisit the relationship between educational and income inequalities in a historical perspective, using a newly developed annual dataset of average years of education in Europe. Theoretically one would expect a reduction in educational inequality should, given the positive correlation between education level and income, initially increase and then, at a later stage, reduce income inequality. Testing for such a Kuznets-type relationship between educational and income inequalities yields an unexpected result: we find the expected inverse U-curve before the 1950s, but the relationship changes into a normal U-curve afterward. We explain this observation by a change in the trend of skill premium during the second half of the twentieth century due to an increased relative demand for skills, which contradicts the usual assumption of decreasing returns to education. Due to lack of appropriate wage data, we cannot directly capture this effect. Yet, once we use an instrumental variable estimation method to filter out the effect of the omitted skill premium, the expected inverse U-curve also appears for the latter decades of the twentieth century.

Suggested Citation

  • Péter Földvári & Bas van Leeuwen, 2014. "Educational and income inequality in Europe, ca. 1870–2000," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 8(3), pages 271-300, September.
  • Handle: RePEc:afc:cliome:v:8:y:2014:i:3:p:271-300
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    File URL: http://dx.doi.org/10.1007/s11698-013-0105-3
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    Cited by:

    1. Lee, Jong-Wha & Lee, Hanol, 2016. "Human capital in the long run," Journal of Development Economics, Elsevier, vol. 122(C), pages 147-169.

    More about this item

    Keywords

    Average years of education; Economic development; Inequality Kuznets-curve;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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