Educational Inequality

24 Pages Posted: 31 Mar 2001 Last revised: 14 May 2008

See all articles by Yoshiaki Azuma

Yoshiaki Azuma

Doshisha University, Faculty of Economics

Herschel I. Grossman

Deceased

Multiple version iconThere are 2 versions of this paper

Date Written: April 2001

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

Azuma, Yoshiaki and Grossman (deceased), Herschel I., Educational Inequality (April 2001). NBER Working Paper No. w8206. Available at SSRN: https://ssrn.com/abstract=265300

Yoshiaki Azuma (Contact Author)

Doshisha University, Faculty of Economics

Karasuma-Imadegawa Kamigyo
Kyoto 602-8580
Japan

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