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Educational Inequality

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  • Yoshiaki Azuma
  • Herschel I. Grossman

Abstract

This paper develops a theoretical model that relates changes in educational inequality to the combined effects of innovations that have increased the relative demand for more educated labor and innovations that have increased ability premiums. Under the assumption that in the long run individual decisions to become more educated equalize the lifetime earnings of more educated workers and comparable less educated workers, our model yields two novel implications: First, given the existence of ability premiums, an innovation in the relative demand for more educated labor increases educational inequality in the short run, but, ceteris paribus, would decrease educational inequality in the long run. Second, in the long run innovations that increase ability premiums cause educational inequality to be larger than otherwise. In applying our theory to recent changes in educational inequality in the United States, we suggest that increases in ability premiums are dampening the long-run response of the relative supply of more educated workers that otherwise would reverse previous increases in educational inequality.

Suggested Citation

  • Yoshiaki Azuma & Herschel I. Grossman, 2001. "Educational Inequality," NBER Working Papers 8206, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8206
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    16. Huw Lloyd-Ellis, 1999. "Endogenous Technological Change and Wage Inequality," American Economic Review, American Economic Association, vol. 89(1), pages 47-77, March.
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    Cited by:

    1. Crifo, Patricia, 2008. "Skill supply and biased technical change," Labour Economics, Elsevier, vol. 15(5), pages 812-830, October.
    2. Linda Loubert, 2005. "Discrimination in education financing," The Review of Black Political Economy, Springer;National Economic Association, vol. 32(3), pages 17-27, March.
    3. Cecilia Garcia-Penalosa & Campbell leith & Chol-Won Li, 2001. "Wage Inequality and the Effort Incentive Effects of Technical Progress," Working Papers 2001_14, Business School - Economics, University of Glasgow.
    4. Bas Straathof, 2006. "Schooling inequality and the rise of research," CPB Discussion Paper 74.rdf, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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