Increasing skill premium and education decisions: Higher intra-skilled inequality and lower inter-skill mobility

Joel Hellier ()

No 643, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: This paper analyses the effects of an increase in earnings inequality between skilled and unskilled workers on education decisions and intergenerational mobility, depending on the way higher education is funded. The rise in inequality typically encourages higher education attending, but it also (i) improves the relative position of children from skilled families by reducing inter-skill intergenerational mobility and (ii) fosters inequality across skilled workers (‘intra-skilled inequality’) when higher education is costly. The impact depends on education financing and the only situation in which skilled families are not favoured is when higher education is freely provided. Those results are in line with the developments observed in advanced economies which have experienced a constant increase in their skill premia in the last four decades.

Keywords: Education; Inequality; Intergenerational mobility; Skill. (search for similar items in EconPapers)
JEL-codes: I21 J24 J31 J62 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2023-04
New Economics Papers: this item is included in nep-lma
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http://www.ecineq.org/milano/WP/ECINEQ2023-643.pdf First version, 2023 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:inq:inqwps:ecineq2023-643

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