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Educational Upgrading and Returns to Skills in Latin America. Evidence from a Supply-Demand Framework, 1990-2010

  • Leonardo Gasparini

    (CEDLAS - UNLP)

  • Sebastián Galiani

    (Washington University in St. Louis)

  • Guillermo Cruces

    (CEDLAS-UNLP and CONICET)

  • Pablo Acosta

    (World Bank, Human Development, Latin America and Caribbean Region)

It has been argued that a factor behind the decline in income inequality in Latin America in the 2000s was the educational upgrading of its labor force. Between 1990 and 2010, the proportion of the labor force in the region with at least secondary education increased from 40 to 60 percent. Concurrently, returns to secondary education completion fell throughout the past two decades, while the 2000s saw a reversal in the increase in the returns to tertiary education experienced in the 1990s. This paper studies the evolution of wage differentials and the trends in the supply of workers by educational level for 16 Latin American countries between 1990 and 2000. The analysis estimates the relative contribution of supply and demand factors behind recent trends in skill premia for tertiary and secondary educated workers. Supplyside factors seem to have limited explanatory power relative to demandside factors, and are only relevant to explain part of the fall in wage premia for highschool graduates. Although there is significant heterogeneity in individual country experiences, on average the trend reversal in labor demand in the 2000s can be partially attributed to the recent boom in commodity prices that could favor the unskilled (nontertiary educated) workforce, although employment patterns by sector suggest that other withinsector forces are also at play, such as technological diffusion or skill mismatches that may reduce the labor productivity of highlyeducated workers.

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File URL: http://cedlas.econo.unlp.edu.ar/archivos_upload/doc_cedlas127.pdf
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Paper provided by CEDLAS, Universidad Nacional de La Plata in its series CEDLAS, Working Papers with number 0127.

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Length: 53 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:dls:wpaper:0127
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Web page: http://cedlas.econo.unlp.edu.ar/

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  1. Marco Manacorda & Carolina Sanchez-Paramo & Norbert Schady, 2005. "Changes in Returns to Education in Latin America: the Role of Demand and Supply of Skills," CEP Discussion Papers dp0712, Centre for Economic Performance, LSE.
  2. Robert J. Barro & Jong-Wha Lee, 2010. "A New Data Set of Educational Attainment in the World, 1950-2010," NBER Working Papers 15902, National Bureau of Economic Research, Inc.
  3. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August.
  4. Leonardo Gasparini & Pablo Acosta, 2004. "Capital Accumulation, Trade Liberalization and Rising Wage Inequality: The Case of Argentina," CEDLAS, Working Papers 0005, CEDLAS, Universidad Nacional de La Plata.
  5. Leonardo Gasparini & Nora Lustig, 2011. "The rise and fall of income inequality in Latin America," Working Papers 213, ECINEQ, Society for the Study of Economic Inequality.
  6. Ferreira, Francisco H. G. & Leite, Phillippe G. & Wai-Poi, Matthew, 2007. "Trade liberalization, employment flows, and wage inequality in Brazil," Policy Research Working Paper Series 4108, The World Bank.
  7. Joanne Lindley & Stephen Machin, 2011. "Rising Wage Inequality and Postgraduate Education," CEP Discussion Papers dp1075, Centre for Economic Performance, LSE.
  8. Leonardo Gasparini & Guillermo Cruces & Leopoldo Tornarolli, 2009. "Recent trends in income inequality in Latin America," Working Papers 132, ECINEQ, Society for the Study of Economic Inequality.
  9. Claudia Goldin & Lawrence F. Katz, 2007. "The Race between Education and Technology: The Evolution of U.S. Educational Wage Differentials, 1890 to 2005," NBER Working Papers 12984, National Bureau of Economic Research, Inc.
  10. Manoj Atolia, 2002. "Trade Liberalization and Rising Wage Inequality in Latin America: Reconciliation with HOS Theory," Working Papers wp2002_03_01, Department of Economics, Florida State University, revised Feb 2006.
  11. Gabriel Montes Rojas, 2006. "Skill premia in Mexico: demand and supply factors," Applied Economics Letters, Taylor & Francis Journals, vol. 13(14), pages 917-924.
  12. Acemoglu, Daron & Autor, David, 2011. "Skills, Tasks and Technologies: Implications for Employment and Earnings," Handbook of Labor Economics, Elsevier.
  13. Galiani, Sebastian & Sanguinetti, Pablo, 2003. "The impact of trade liberalization on wage inequality: evidence from Argentina," Journal of Development Economics, Elsevier, vol. 72(2), pages 497-513, December.
  14. Ann Harrison & Gordon Hanson, 1999. "Who Gains from Trade Reform? Some Remaining Puzzles," NBER Working Papers 6915, National Bureau of Economic Research, Inc.
  15. Gindling, T.H. & Terrell, Katherine, 2005. "The effect of minimum wages on actual wages in formal and informal sectors in Costa Rica," World Development, Elsevier, vol. 33(11), pages 1905-1921, November.
  16. Brambilla, Irene & Carneiro, Rafael Dix & Lederman, Daniel & Porto, Guido, 2010. "Skills, exports, and the wages of five million Latin American workers," Policy Research Working Paper Series 5246, The World Bank.
  17. Guillermo Cruces & Carolina García Domench & Leonardo Gasparini, 2012. "Inequality in Education: Evidence for Latin America," CEDLAS, Working Papers 0135, CEDLAS, Universidad Nacional de La Plata.
  18. Guillermo Cruces & Leonardo Gasparini, 2008. "A Distribution in Motion: The Case of Argentina," CEDLAS, Working Papers 0078, CEDLAS, Universidad Nacional de La Plata.
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