Human Capital and Income Inequality

31 Pages Posted: 29 Jun 2018

Date Written: February 15, 2018

Abstract

We investigate empirically how human capital, measured by educational attainment, is related to income distribution. We find that the regressions, using a panel data set covering a broad range of countries between 1980 and 2015, show that a more equal distribution of education contributes significantly to reducing income inequality. Educational expansion is a major factor in reducing educational inequality and thus income inequality. Public policies that improve social benefits and price stability contribute to reducing income inequality, while public spending on education helps to reduce educational inequality. In contrast, higher per capita income, greater openness to international trade, and faster technological progress tend to make both income and education distribution more unequal. Using the calibration of empirical results, we find that we can attribute the rising income inequality within East Asian economies in recent decades to the unequalizing effects of fast income growth and rapid progress in globalization and technological change, which have surpassed the income-equalizing effects from improved equality in the distribution of educational attainment during the period.

Keywords: income distribution, inequality, human capital, education, globalization, technological change

JEL Classification: D31, H52, I24, O53

Suggested Citation

Lee, Jong-Wha and Lee, Hanol, Human Capital and Income Inequality (February 15, 2018). ADBI Working Paper 810. Available at SSRN: https://ssrn.com/abstract=3198573 or http://dx.doi.org/10.2139/ssrn.3198573

Jong-Wha Lee (Contact Author)

Korea University ( email )

Anam-dong, Sungbuk-Ku
Dept. of Economics
Seoul, 136-701
82-2-3290-2216 (Phone)
82-2-928-4948 (Fax)

Hanol Lee

Independent

No Address Available

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