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Educational Qualifications and Wage Inequality: Evidence for Europe

  • Budría, Santiago

    ()

    (Universidade da Madeira)

  • Pereira, Pedro T.

    ()

    (University of Madeira)

This paper explores the connection between education and wage inequality in nine European countries. We exploit the quantile regression technique to calculate returns to lower secondary, upper secondary and tertiary education at different points of the wage distribution. We find that returns to tertiary education are highly increasing when moving from the lower to the upper quantiles. This finding suggests that an educational expansion towards tertiary education is expected, ceteris paribus, to increase overall wage inequality through the withindimension. Returns to secondary education are more homogeneous across quantiles, thus suggesting that an educational expansion towards secondary education is expected to have a more limited impact on within-groups dispersion. Using data from the last decades, we assess how the impact of education on wage inequality has evolved over time. We detect different trends across countries. A common feature is that the inequality increasing effect of tertiary education became more acute over the last years.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1763.

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Length: 39 pages
Date of creation: Sep 2005
Date of revision:
Publication status: published in: Revista de Economía Aplicada, 2011, 56 (19), 5-34
Handle: RePEc:iza:izadps:dp1763
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  1. Pereira, Pedro T. & Martins, Pedro S., 2000. "Does Education Reduce Wage Inequality? Quantile Regressions Evidence from Fifteen European Countries," IZA Discussion Papers 120, Institute for the Study of Labor (IZA).
  2. Giorgio Brunello, 2010. "The effects of cohort size on European earnings," Journal of Population Economics, Springer, vol. 23(1), pages 273-290, January.
  3. Telhado Pereira, Pedro & Silva Martins, Pedro, 2002. "Is there a return-risk link in education?," Economics Letters, Elsevier, vol. 75(1), pages 31-37, March.
  4. Sanders Mark & Weel Bas ter, 2000. "Skill-Biased Technical Change: Theoretical Concepts, Empirical Problems and a Survey of the Evidence," Research Memorandum 012, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  5. Eswar S. Prasad, 2004. "The Unbearable Stability of the German Wage Structure: Evidence and Interpretation," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 354-385.
  6. Joop Hartog & Pedro Pereira & Jose Vieira, 2001. "Changing returns to education in Portugal during the 1980s and early 1990s: OLS and quantile regression estimators," Applied Economics, Taylor & Francis Journals, vol. 33(8), pages 1021-1037.
  7. Harmon, Colm & Hogan, Vincent & Walker, Ian, 2003. "Dispersion in the economic return to schooling," Labour Economics, Elsevier, vol. 10(2), pages 205-214, April.
  8. Daron Acemoglu, 2003. "Cross-Country Inequality Trends," Economic Journal, Royal Economic Society, vol. 113(485), pages F121-F149, February.
  9. Alberto Abadie, 1997. "Changes in Spanish labor income structure during the 1980's: a quantile regression aproach," Investigaciones Economicas, Fundación SEPI, vol. 21(2), pages 253-272, May.
  10. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
  11. Buchinsky, Moshe, 1994. "Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression," Econometrica, Econometric Society, vol. 62(2), pages 405-58, March.
  12. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
  13. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Trends in U.S. Wage Inequality: Re-Assessing the Revisionists," NBER Working Papers 11627, National Bureau of Economic Research, Inc.
  14. Fersterer, Josef & Winter-Ebmer, Rudolf, 2003. "Are Austrian returns to education falling over time?," Labour Economics, Elsevier, vol. 10(1), pages 73-89, February.
  15. Vieira, Jose A. C., 1999. "Returns to education in Portugal," Labour Economics, Elsevier, vol. 6(4), pages 535-541, November.
  16. José A. F. Machado & José Mata, 2001. "Earning functions in Portugal 1982-1994: Evidence from quantile regressions," Empirical Economics, Springer, vol. 26(1), pages 115-134.
  17. Tom Clark & Jayne Taylor, 1999. "Income inequality: a tale of two cycles?," Fiscal Studies, Institute for Fiscal Studies, vol. 20(4), pages 387-408, December.
  18. Gosling, Amanda & Machin, Stephen & Meghir, Costas, 2000. "The Changing Distribution of Male Wages in the U.K," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 635-66, October.
  19. Cholezas, Ioannis & Tsakloglou, Panos, 2007. "Earnings Inequality in Europe: Structure and Patterns of Inter-Temporal Changes," IZA Discussion Papers 2636, Institute for the Study of Labor (IZA).
  20. De Gregorio, Jose & Lee, Jong-Wha, 2002. "Education and Income Inequality: New Evidence from Cross-Country Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(3), pages 395-416, September.
  21. Hartog, Joop, 2000. "Over-education and earnings: where are we, where should we go?," Economics of Education Review, Elsevier, vol. 19(2), pages 131-147, April.
  22. Peter Dolton, 2001. "Over education in the graduate labour market: Some evidence from alumni data," CEE Discussion Papers 0009, Centre for the Economics of Education, LSE.
  23. Moshe Buchinsky, 1998. "Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 88-126.
  24. Machin, Stephen, 1997. "The decline of labour market institutions and the rise in wage inequality in Britain," European Economic Review, Elsevier, vol. 41(3-5), pages 647-657, April.
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