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Human Capital Disparities and Earnings Inequality in The Portuguese Private Labour Market

Author

Listed:
  • Derick R. C. Almeida

    (CeBER, Faculty of Economics)

  • João A. S. Andrade

    (CeBER, Faculty of Economics)

  • Adelaide Duarte

    (CeBER, Faculty of Economics)

  • Marta Simões

    (CeBER, Faculty of Economics)

Abstract

This paper examines human capital inequality and how it relates to earnings inequality in Portugal using data from Quadros de Pessoal for the period 1986–2017. The objective is threefold: (i) show how the distribution of human capital has evolved over time; (ii) investigate the association between human capital inequality and earnings inequality; and (iii) analyse the role of returns to schooling, together with human capital inequality, in the explanation of earnings inequality. Our findings suggest that human capital inequality, computed based on the distribution of average years of schooling of employees working in the Portuguese private labour market, records a positive trend until 2007 and decreases from this year onwards, suggesting the existence of a Kuznets curve of education relating educational attainment levels and education inequality. Based on the decomposition of a Generalized Entropy index (Theil N) for earnings inequality, we observe that inequality in the distribution of human capital plays an important role in the explanation of earnings inequality, although this role has become less important over the last decade. Using Mincerian earnings regressions to estimate the returns to schooling together with the Blinder-Oaxaca decomposition of real hourly earnings we confirm that there are two important forces associated with the observed decrease in earnings inequality: a reduction in education inequality and compressed returns to schooling, mainly in tertiary education.

Suggested Citation

  • Derick R. C. Almeida & João A. S. Andrade & Adelaide Duarte & Marta Simões, 2022. "Human Capital Disparities and Earnings Inequality in The Portuguese Private Labour Market," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 159(1), pages 145-167, January.
    • Handle: RePEc:spr:soinre:v:159:y:2022:i:1:d:10.1007_s11205-021-02745-0
    DOI: 10.1007/s11205-021-02745-0
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    1. Takahiro Akita, 2024. "Educational Expansion and Educational Inequality," Working Papers EMS_2024_02, Research Institute, International University of Japan.

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    More about this item

    Keywords

    Human capital; Schooling; Earnings inequality; Returns to schooling; Decomposition analysis; Portugal;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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