Quotation Sauer, Petra and Zagler, Martin. 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.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title (In)equality in Education and Economic Development
Title of whole publication Department of Economics Working Paper Series, 163. WU Vienna University of Economics and Business, Vienna
Year 2014
URL http://epub.wu.ac.at/4078/

Associations

People
Sauer, Petra (Details)
Zagler, Martin (Details)
Organization
Research Institute for International Taxation FI (Details)
Department of Economics (Crespo Cuaresma) (Details)
Research Institute for Human Capital and Development FI (Former organization)
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