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Education, Economic Growth and Measured Income Inequality

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  • Günther Rehme

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Abstract

In this paper education simultaneously affects growth and income inequality. More education does not necessarily decrease inequality when the latter is assessed by the Lorenz dominance criterion. Increases in education first increase and then decrease growth as well as income inequality, when measured by the Gini coefficient. There is no clear functional relationship between growth and measured income inequality. The model identifies regimes of this relationship which depend crucially on the production and schooling technology. Conventional growth regressions with human capital and inequality as regressors may miss the richness of the underlying nonlinearities, but viewed as approximations may still provide important information on the nonlinear relationship between growth and education.

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  • Günther Rehme, 2006. "Education, Economic Growth and Measured Income Inequality," LIS Working papers 428, LIS Cross-National Data Center in Luxembourg.
  • Handle: RePEc:lis:liswps:428
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    References listed on IDEAS

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    1. anonymous, 1995. "Does the bouncing ball lead to economic growth?," Regional Update, Federal Reserve Bank of Atlanta, issue Jul, pages 1-2,4-6.
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    3. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    4. Rehme, Gunther, 1999. "Education, economic growth and personal income inequality across countries," Economics Working Papers ECO 1999/42, European University Institute.
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    6. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
    7. Hongyi Li & Heng‐fu Zou, 1998. "Income Inequality is not Harmful for Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 2(3), pages 318-334, October.
    8. O'Higgins, Michael & Schmaus, Guenther & Stephenson, Geoffrey, 1989. "Income Distribution and Redistribution: A Microdata Analysis for Seven Countries," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 35(2), pages 107-131, June.
    9. Büttner, Thiess & Fitzenberger, Bernd, 1998. "Central wage bargaining and local wage flexibility: evidence from the entire wage distribution," ZEW Discussion Papers 98-39, ZEW - Leibniz Centre for European Economic Research.
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