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Education, Growth, and Income Inequality

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  • Coen Teulings

    (CPB Netherlands Bureau for Economic Policy Analysis and University of Amsterdam)

  • Thijs van Rens

    (CREI and Universitat Pompeu Fabra)

Abstract

Estimates of the effect of education on GDP (the social return) have been hard to reconcile with micro evidence on the private return to schooling. We present a simple explanation combining two ideas: imperfect substitution and endogenous skill-biased technological progress and use cross-country panel data on inequality and GDP to test these ideas. A one-year increase in the level of education reduces the private return by 2 percentage points, consistent with Katz-Murphy's (1992) elasticity of substitution. We find no evidence for reversal of this initial effect as in Acemoglu (2002). In the short run, the social return equals the private return. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Coen Teulings & Thijs van Rens, 2008. "Education, Growth, and Income Inequality," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 89-104, February.
  • Handle: RePEc:tpr:restat:v:90:y:2008:i:1:p:89-104
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    Cited by:

    1. Coen Teulings & Thijs van Rens, 2008. "Education, Growth, and Income Inequality," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 89-104, February.
    2. Miguel Portela & Rob Alessie & Coen Teulings, 2010. "Measurement Error in Education and Growth Regressions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(3), pages 618-639, September.
    3. Schiffbauer, Marc, 2006. "Theoretical and methodological study on the role of public policies in fostering innovation and growth," Papers DYNREG04, Economic and Social Research Institute (ESRI).
    4. Asplund, Rita, 2004. "A Macroeconomic Perspective on Education and Inequality," Discussion Papers 906, The Research Institute of the Finnish Economy.
    5. Bos, Frits & Teulings, Coen, 2011. "Evaluating election platforms: a task for fiscal councils? Scope and rules of the game in view of 25 years of Dutch practice," MPRA Paper 31536, University Library of Munich, Germany.
    6. Stephen Jenkins, 2015. "World income inequality databases: an assessment of WIID and SWIID," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(4), pages 629-671, December.
    7. Pieter A. Gautier & Coen N. Teulings, 2015. "Sorting And The Output Loss Due To Search Frictions," Journal of the European Economic Association, European Economic Association, vol. 13(6), pages 1136-1166, December.
    8. Tetsuo Ono & Yuki Uchida, 2016. "Inequality and Education Choice," Discussion Papers in Economics and Business 16-17, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    9. repec:spr:series:v:8:y:2017:i:4:d:10.1007_s13209-017-0162-0 is not listed on IDEAS
    10. Heckman, James J. & Matzkin, Rosa & Nesheim, Lars, 2003. "Simulation and Estimation of Hedonic Models," IZA Discussion Papers 843, Institute for the Study of Labor (IZA).
    11. Thijs van Rens & Almut Balleer, 2007. "Cyclical Skill-Biased Technological Change," 2007 Meeting Papers 62, Society for Economic Dynamics.
    12. Tiago Neves Sequeira & Marcelo Santos & Alexandra Ferreira-Lopes, 2017. "Income Inequality, TFP, and Human Capital," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 89-111, March.
    13. Barassou Diawara & Keisuke Osumi, 2010. "Education and job complexity levels," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 57(4), pages 361-368, December.
    14. Robert A.J. Dur & Coen N. Teulings, 2001. "Education and Efficient Redistribution," Tinbergen Institute Discussion Papers 01-090/3, Tinbergen Institute, revised 12 Jun 2003.
    15. Dur, Robert & Glazer, Amihai, 2008. "Subsidizing Enjoyable Education," Labour Economics, Elsevier, vol. 15(5), pages 1023-1039, October.
    16. James J. Heckman & Rosa Matzkin & Lars Nesheim, 2003. "Simulation and Estimation of Nonaddative Hedonic Models," NBER Working Papers 9895, National Bureau of Economic Research, Inc.
    17. Ana Hidalgo-Cabrillana & Zoë Kuehn & Cristina Lopez-Mayan, 2017. "Development accounting using PIAAC data," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 8(4), pages 373-399, November.

    More about this item

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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