Connecting the Unobserved Dots: A Decomposition Analysis of Changes in Earnings Inequality in Urban Argentina, 1980-2002

40 Pages Posted: 20 Apr 2016  

Gabriel Demombynes

University of California, Berkeley; World Bank

Johannes Metzler

Ludwig Maximilian University of Munich - Munich Graduate School of Economics (MGSE)

Date Written: May 1, 2008

Abstract

There are several possible explanations for the observed changes in inequality, the returns to education, and the gap between the wages of informal and formal salaried workers in Argentina over the period 1980-2002. Largely due to the lack of evidence for competing explanations, skill-biased technical change is the most likely explanation for the increases in the returns to education that occurred in the 1990s. Using a semi-parametric re-weighting variance decomposition technique and data from the Permanent Household Survey, the authors show that during the same period there was an increase in the returns to unobserved skill. This finding lends support to the hypothesis that skill-biased technical change has been a main driver of increases in inequality in Argentina. The pattern of changes suggests that the growth in returns to unobserved skill may have been partly responsible for the relative deterioration of informal salaried wages during the 1990s.

Keywords: Labor Markets, Access & Equity in Basic Education, Primary Education, Education For All

Suggested Citation

Demombynes, Gabriel and Metzler, Johannes, Connecting the Unobserved Dots: A Decomposition Analysis of Changes in Earnings Inequality in Urban Argentina, 1980-2002 (May 1, 2008). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1149127

Gabriel Demombynes (Contact Author)

University of California, Berkeley

310 Barrows Hall
Berkeley, CA 94720
United States

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

Johannes Metzler

Ludwig Maximilian University of Munich - Munich Graduate School of Economics (MGSE) ( email )

Kaulbachstrasse 45
M√ľnchen, 80539
Germany

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