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Education, economic growth and personal income inequality across countries

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  • Rehme, Gunther

Abstract

This paper offers a supply-side explanation of the cross-country variation in long-run growth and inequality. In the model human capital is 'lumpy' and public education directly affects growth, the number of high-skilled people and wages. Growth and income equality are shown to depend in an important way on the composition of human capital and the productivity of the education sector. Contrary to some recent results the data show that when controlling for initial income or the educational mix of the labour force, higher (within-country) inequality (significantly) implies lower growth for a typical country in the period 1960-90. Furthermore, countries with a more productive education sector have lower inequality. Thus, institutions and policies which generate more high-skilled people or enhance the productivity of the education sector seem to affect long-run income equality and growth in a positive way.

Suggested Citation

  • Rehme, Gunther, 1999. "Education, economic growth and personal income inequality across countries," Economics Working Papers ECO 1999/42, European University Institute.
    • Handle: RePEc:eui:euiwps:eco1999/42
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    Cited by:

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    3. Julia Bock-Schappelwein & Rainer Eppel & Ulrike Mühlberger, 2009. "Sozialpolitik als Produktivkraft," WIFO Monatsberichte (monthly reports), WIFO, vol. 82(11), pages 845-857, November.
    4. Timothy M Smeeding, 2002. "Globalisation, Inequality and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study (LIS)," RBA Annual Conference Volume (Discontinued), in: David Gruen & Terry O'Brien & Jeremy Lawson (ed.),Globalisation, Living Standards and Inequality: Recent Progress and Continuing Challenges, Reserve Bank of Australia.

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    More about this item

    Keywords

    Growth; Distribution; Education; Public Policy;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • I2 - Health, Education, and Welfare - - Education
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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