“Convexification” and “Deconvexification” of the Peruavian Wage Profile: A Tale of Declining Education Quality
"Peruvian average wage profile with respect to schooling is convex. Returns to higher education are around nine percentage points larger than returns to basic education. We explore two possible explanations for this phenomenon: a composition effect driven by differences in individual ability and heterogeneous education quality. We use the theoretical models developed in Card (1994) and Card and Krueger (1996) to analyze the effects that individual ability and education quality can have on the observed relationship between wages and schooling. We test the implications of these models using Peruvian data from a novel survey that includes measures of cognitive skills. We do not find evidence of increasing returns by ability. Instead, empirical results are consistent with the predictions of a model of endogenous schooling with heterogeneous education quality. Evidence suggests that the Peruvian convex wage schedule is the result of two superimposed wage profiles: one corresponding to a low quality basic education system and, the other, to a higher education system with better quality. Declining education quality at basic and higher education, thus, appear to have a role when explaining the “convexification” and recent “deconvexification” of the wage profile, respectively."
|Date of creation:||Apr 2012|
|Date of revision:||Apr 2012|
|Contact details of provider:|| Web page: http://www.up.edu.pe/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Card & Alan B. Krueger, 1996.
"Labor Market Effects of School Quality: Theory and Evidence,"
NBER Working Papers
5450, National Bureau of Economic Research, Inc.
- David Card & Alan B. Krueger, 1996. "Labor Market Effects of School Quality: Theory and Evidence," Working Papers 736, Princeton University, Department of Economics, Industrial Relations Section..
- repec:fth:prinin:357 is not listed on IDEAS
- David Card, 1994. "Earnings, Schooling, and Ability Revisited," Working Papers 710, Princeton University, Department of Economics, Industrial Relations Section..
- David Card, 1994. "Earnings, Schooling, and Ability Revisited," NBER Working Papers 4832, National Bureau of Economic Research, Inc.
- Yamada, Gustavo, 2009. "Rendimientos de la educación superior en el mercado laboral. El caso de Perú," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(302), pages 485-511, abril-jun.
- Gustavo Yamada & Juan Castro, 2010. "Educación superior e ingresos laborales: Estimaciones paramétricas y no paramétricas de la rentabilidad por niveles y carreras en el Perú," Working Papers 10-06, Departamento de Economía, Universidad del Pacífico, revised Dec 2010.
- Juan F. Castro & Eduardo Morón & Cynthia Sanborn, 2009. "Helping Reforms Deliver Inclusive Growth in Peru," Chapters of Books, in: L. Rojas-Suarez (ed.), Growing Pains in Latin America, edition 1, volume 1, chapter 1, pages 236-293 Departamento de Economía, Universidad del Pacífico.
- Martin Nordin & Dan-Olof Rooth, 2014. "Increasing Returns to Schooling by Ability? A Comparison between the USA and Sweden," Manchester School, University of Manchester, vol. 82, pages 1-20, December.
- Nordin, Martin & Rooth , Dan-Olof, 2011. "Increasing Returns to Schooling by Ability? A Comparison Between the US and Sweden," Working Papers 2011:17, Lund University, Department of Economics.
- Clifford Clogg & James Shockey, 1984. "Mismatch between occupation and schooling: A prevalence measure, recent trends and demographic analysis," Demography, Springer;Population Association of America (PAA), vol. 21(2), pages 235-257, May.
- Flavio Cunha & James J. Heckman, 2008. "Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
- repec:rim:rimwps:30-08 is not listed on IDEAS
- Chiara Binelli, 2008. "Returns to Education and Increasing Wage Inequality in Latin America," Working Paper Series 30_08, The Rimini Centre for Economic Analysis.
- Juan Castro & Gustavo Yamada & Omar Arias, 2011. "Higher Education Decisions in Peru: On the Role of Financial Constraints, Skills, and Family Background," Working Papers 11-14, Departamento de Economía, Universidad del Pacífico, revised Dec 2011.
- Petra E. Todd & Kenneth I. Wolpin, 2003. "On The Specification and Estimation of The Production Function for Cognitive Achievement," Economic Journal, Royal Economic Society, vol. 113(485), pages 3-33, February. Full references (including those not matched with items on IDEAS)