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Educational Inequality

  • Yoshiaki Azuma
  • Herschel I. Grossman

This paper develops a theoretical model that relates changes in educational inequality to the combined effects of innovations that have increased the relative demand for more educated labor and innovations that have increased ability premiums. Under the assumption that in the long run individual decisions to become more educated equalize the lifetime earnings of more educated workers and comparable less educated workers, our model yields two novel implications: First, given the existence of ability premiums, an innovation in the relative demand for more educated labor increases educational inequality in the short run, but, ceteris paribus, would decrease educational inequality in the long run. Second, in the long run innovations that increase ability premiums cause educational inequality to be larger than otherwise. In applying our theory to recent changes in educational inequality in the United States, we suggest that increases in ability premiums are dampening the long-run response of the relative supply of more educated workers that otherwise would reverse previous increases in educational inequality.

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Article provided by CEIS in its journal Labour.

Volume (Year): 17 (2003)
Issue (Month): 3 (09)
Pages: 317-335

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Handle: RePEc:bla:labour:v:17:y:2003:i:3:p:317-335
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  1. Richard J. Murnane & John B. Willett & Frank Levy, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," NBER Working Papers 5076, National Bureau of Economic Research, Inc.
  2. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  3. repec:tpr:qjecon:v:113:y:1998:i:4:p:1169-1213 is not listed on IDEAS
  4. Daron Acemoglu, 2001. "Directed Technical Change," NBER Working Papers 8287, National Bureau of Economic Research, Inc.
  5. Kalemli-Ozcan, Sebnem & Ryder, Harl E. & Weil, David N., 2000. "Mortality decline, human capital investment, and economic growth," Journal of Development Economics, Elsevier, vol. 62(1), pages 1-23, June.
  6. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
  7. David Autor & Lawrence Katz & Alan Krueger, 1997. "Computing Inequality: Have Computers Changed the Labor Market?," Working Papers 756, Princeton University, Department of Economics, Industrial Relations Section..
  8. Aghion, Philippe & Howitt, Peter & Violante, Giovanni L, 2000. "General Purpose Technology and Within-Group Inequality," CEPR Discussion Papers 2474, C.E.P.R. Discussion Papers.
  9. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  10. Robert H. Topel, 1997. "Factor Proportions and Relative Wages: The Supply-Side Determinants of Wage Inequality," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 55-74, Spring.
  11. Oded Galor & Omer Moav, 1998. "Ability Biased Technological Transition, Wage Inequality, and Economic Growth," Working Papers 98-14, Brown University, Department of Economics.
  12. Gould, Eric D & Moav, Omer & Weinberg, Bruce A, 2001. " Precautionary Demand for Education, Inequality, and Technological Progress," Journal of Economic Growth, Springer, vol. 6(4), pages 285-315, December.
  13. Galor, Oded & Tsiddon, Daniel, 1996. "Technological Progress, Mobility, and Economic Growth," CEPR Discussion Papers 1413, C.E.P.R. Discussion Papers.
  14. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  15. Huw Lloyd-Ellis, 1999. "Endogenous Technological Change and Wage Inequality," American Economic Review, American Economic Association, vol. 89(1), pages 47-77, March.
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