BOFIT Seminar - Guanghua Wan (Fudan University) - Education Expansion and Income Inequality: Empirical Evidence from China

Co-authors: Xiaoshan Hu (Shanghai Dianji University) and Congmin Zuo (Fudan University) 


Education has long been perceived as a “great equalizer”. Despite universal rises in schooling years, however, income distribution has been worsening world-wide. This paper develops a method that decomposes the contribution of a variable to a change in inequality into three components:  the mean, the dispersion, and the price components. The method is then used to evaluate the roles of the education variable in the reduction of China’s wage inequality from 2010 to 2018. We found that: (1) education contributes more than 30% to the total wage inequality in both 2010 and 2018; (2) education expansion accounts for 70% of the overall decline in wage inequality from 2010 to 2018; (3) the 70% inequality-reducing effect is predominantly attributable to the declines in the dispersion and price components while the mean component actually rose. 


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