Returns to Education and Increasing Wage Inequality in Latin America

Chiara Binelli

Working Paper series from Rimini Centre for Economic Analysis

Abstract: This paper studies a central feature that characterized the changes in wage inequality in Latin America in the 1990s: log wages became a convex function of the level of education. The wage gap between Higher and Intermediate Education increased and the one between Intermediate and Basic Education declined. The double change in the wage differentials was driven by a significant drop in the mean wage at Intermediate. I develop and simulate a dynamic general equilibrium model of savings and educational choices under credit constraints and uninsurable earnings' risk in which ability is an important component of individual wages. I estimate the parameters of the model using micro data from Mexico. The results show that the convexification was the result of changes in the prices of education due to changes in its supply. Absent the general equilibrium price effects, the changes in ability composition by education needed to produce the convexification would have been unrealistically high.

Keywords: Latin America; Wage Inequality; Education Choices; General Equilibrium filtering (search for similar items in EconPapers)
JEL-codes: C68 J23 J24 J31 (search for similar items in EconPapers)
Date: 2008-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.rcea.org/RePEc/pdf/wp30_08.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:30_08

Access Statistics for this paper

More papers in Working Paper series from Rimini Centre for Economic Analysis Contact information at EDIRC.
Bibliographic data for series maintained by Marco Savioli (marco.savioli@unisalento.it).