Education as a driver of income inequality in twentieth-century Africa

TY - UNPB

T1 - Education as a driver of income inequality in twentieth-century Africa

AU - van Leeuwen, Bas

AU - Li, Jieli

AU - Földvári, Peter

PY - 2012

Y1 - 2012

N2 - In this paper, we address the issue of how education affected income inequality in twentiethcentury Africa. Three channels are identified through which education may affect income inequality. First, an increase in the average educational level is correlated with an increase in average income, which, ceteris paribus, reduces inequality. Second, a reduction in educational inequality may, given a positive correlation between education level and in come, reduce income inequality. Thirdly, an increase in the supply of education may decrease th e price of skilled labour thus lowering income inequality. We find that in the longrun education does not affect income growth, indicating that in twentiethcentury Africa it was inspiration (i.e., Total Factor Productivity [TFP]) rather than perspiration (i.e., education and physical capital) that drove economic development. Testing for the effects of the remaining two channels, we found a significant nonlinear relationship between educational and income inequality suggesting that, contrary to the level of education, these two channels were important in determining income inequality in Africa. Taking an example from the end of the twentieth century, if educational equality had been eliminated, then income inequality would decline by no less than 81%.

AB - In this paper, we address the issue of how education affected income inequality in twentiethcentury Africa. Three channels are identified through which education may affect income inequality. First, an increase in the average educational level is correlated with an increase in average income, which, ceteris paribus, reduces inequality. Second, a reduction in educational inequality may, given a positive correlation between education level and in come, reduce income inequality. Thirdly, an increase in the supply of education may decrease th e price of skilled labour thus lowering income inequality. We find that in the longrun education does not affect income growth, indicating that in twentiethcentury Africa it was inspiration (i.e., Total Factor Productivity [TFP]) rather than perspiration (i.e., education and physical capital) that drove economic development. Testing for the effects of the remaining two channels, we found a significant nonlinear relationship between educational and income inequality suggesting that, contrary to the level of education, these two channels were important in determining income inequality in Africa. Taking an example from the end of the twentieth century, if educational equality had been eliminated, then income inequality would decline by no less than 81%.

KW - Africa

KW - human capital

KW - inequality

M3 - Working paper/Discussion paper

T3 - MPRA Paper

BT - Education as a driver of income inequality in twentieth-century Africa

ER -