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

Bas van Leeuwen, Jieli Li, Peter Földvári

Research output: Working paper/discussion paperWorking paper/Discussion paperScientific

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Abstract

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%.
Original languageEnglish
Number of pages36
Publication statusPublished - 2012

Publication series

NameMPRA Paper
No.43574

Keywords

  • Africa
  • human capital
  • inequality

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