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Changes in Returns to Education in Latin America: the Role of Demand and Supply of Skills

Marco Manacorda (), Carolina Sanchez-Paramo and Norbert Schady

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Changes in the relative wages of workers with different amounts of education have profound implications for developing countries, where initial levels of inequality are often very high. In this paper we use micro data for five Latin American countries over the 1980s and 1990s to document trends in men's returns to education, and to estimate whether the changes in skill premia we observe can be explained by supply or demand factors. We propose a model of demand for skills with three production inputs, and we allow the elasticity of substitution between the different educational inputs to be different using a nested CES function. Using this model, we show that the dramatic expansion in secondary school in many countries in Latin America depressed the wages of workers with secondary school. We also show that there have been sharp increases in the demand for more skilled workers in the region.

Keywords: returns to education; demand and supply of skills (search for similar items in EconPapers)
JEL-codes: J23 J24 O15 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-edu, nep-hrm, nep-lab and nep-ltv
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Related works:
Journal Article: Changes in Returns to Education in Latin America: The Role of Demand and Supply of Skills (2010) Downloads
Working Paper: Changes in returns to education in Latin America: the role of demand and supply of skills (2005) Downloads
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