Income Inequality and Education Revisited Persistence, Endogeneity, and Heterogeneity

This paper presents new results on the relationship between income inequality and education expansion—that is, increasing average years of schooling and reducing inequality of schooling. When dynamic panel estimation techniques are used to address issues of persistence and endogeneity, we find a lar...

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Bibliographic Details
Main Author: Coady, David
Other Authors: Dizioli, Allan
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2017
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a Income Inequality and Education Revisited  |b Persistence, Endogeneity, and Heterogeneity  |c David Coady, Allan Dizioli 
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300 |a 23 pages 
653 |a Population & demography 
653 |a Distribution: General 
653 |a Education and Inequality 
653 |a Demographic Economics: General 
653 |a Income distribution 
653 |a National Government Expenditures and Education 
653 |a Aggregate Factor Income Distribution 
653 |a Education 
653 |a Population and demographics 
653 |a Estimation 
653 |a Demography 
653 |a Education: General 
653 |a Econometric models 
653 |a Population 
653 |a Macroeconomics 
653 |a Estimation techniques 
653 |a Income inequality 
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520 |a This paper presents new results on the relationship between income inequality and education expansion—that is, increasing average years of schooling and reducing inequality of schooling. When dynamic panel estimation techniques are used to address issues of persistence and endogeneity, we find a large, positive, statistically significant and stable relationship between inequality of schooling and income inequality, especially in emerging and developing economies and among older age cohorts. The relationship between income inequality and average years of schooling is positive, consistent with constant or increasing returns to additional years of schooling. While this positive relationship is small and not always statistically significant, we find a statistically significant negative relationship with years of schooling of younger cohorts. Statistical tests indicate that our dynamic estimators are consistent and that our identifying instruments are valid. Policy simulations suggest that education expansion will continue to be inequality reducing. This role will diminish as countries develop, but it could be enhanced through a stronger focus on reducing inequality in the quality of education