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A decomposition method to evaluate the ‘paradox of progress’, with evidence for Argentina

Author

Listed:
  • Javier Alejo

    (IECON-Universidad de la República)

  • Leonardo Gasparini

    (CEDLAS-IIE-UNLP and CONICET)

  • Gabriel Montes-Rojas

    (IIEP-BAIRES-Universidad de Buenos Aires and CONICET)

  • Walter Sosa-Escudero

    (UdeSA and CONICET)

Abstract

The ‘paradox of progress’ is an empirical regularity that associates more education with larger income inequality. Two driving and competing factors behind this phenomenon are the convexity of the ‘Mincer equation’ (that links wages and education) and the heterogeneity in the returns to education, as captured by quantile regressions. We propose a joint least-squares and quantile regression statistical framework to derive a decomposition to evaluate the relative contribution of each explanation. We apply the proposed decomposition strategy to the case of Argentina 1992 to 2015.

Suggested Citation

  • Javier Alejo & Leonardo Gasparini & Gabriel Montes-Rojas & Walter Sosa-Escudero, 2024. "A decomposition method to evaluate the ‘paradox of progress’, with evidence for Argentina," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 22(2), pages 453-472, June.
    • Handle: RePEc:spr:joecin:v:22:y:2024:i:2:d:10.1007_s10888-023-09601-w
    DOI: 10.1007/s10888-023-09601-w
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    More about this item

    Keywords

    Paradox of progress; Quantile regression; Inequality; Returns to education; Argentina;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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