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(In)equality in Education and Economic Development

Zagler, Martin and Sauer, Petra (2014) (In)equality in Education and Economic Development. Department of Economics Working Paper Series, 163. WU Vienna University of Economics and Business, Vienna.

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Abstract

This paper investigates the relationship between economic development and the average Level of education as well as the degree of inequality in the distribution of education, respectively. Approaching this question in a dynamic panel over 60 years and 143 countries with a system GMM estimator reveals strong support for the inclusion of an interaction term between the education Gini coeffcient and average years of schooling, indicating the existence of nonlinear effects. We contribute to the literature in providing strong evidence that more schooling is good for economic growth - irrespective of its distribution - but that the coeffcient is variable and substantially declining in inequality. On the other hand, inequality is positively related to economic growth for low average levels of education, whereas highly educated countries exhibit a statistically insignificant negative relationship between inequality and economic growth. From this it follows that at least a slight increase in the degree of inequality is necessary in order to haul initially poor and low educated economies out of the poverty trap. However, as economies become educated, the effect of educational inequality mainly works indirectly. Accordingly, countries that show greater educational inequality experience lower macro economic returns to education than more equal economies, on average. (authors' abstract)

Item Type: Paper
Keywords: education / economic growth / distribution of education
Classification Codes: JEL D31, I00, O15
Divisions: Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 04 Feb 2014 10:42
Last Modified: 03 Aug 2016 14:47
FIDES Link: https://bach.wu.ac.at/d/research/results/67565/
URI: http://epub.wu.ac.at/id/eprint/4078

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