Page 17 - Education and Inclusive Growth --Jong-Wha Lee Korea University

Education and Inclusive Growthc163

Education and Income Inequality 6

Consistent with our belief, the human capital model indicates that

educational attainment and its distribution across the population affects the
degree of income inequality in a society (Becker and Chiswick, 1966; Mincer,
1974). Under this model, educational inequality is positively associated with

income inequality, if other things are controlled for. In addition, the effect of the
average years of schooling on income inequality is expected to be either positive
or negative, depending on the correlation between educational attainment and

the rates of return on education. An increase in average years of schooling tends
to magnify the variance of wage among workers, given the rates of return on
education or wage rate, and thus lead to a higher level of income inequality.

Meanwhile, if an educational expansion increases the proportion of higher-
educated workers and thus reduces the wage premium, more equal income
distribution is likely to be achieved.
The findings of the previous studies using macro- and micro-level data are

broadly consistent with the predictions of the human capital theory. Overall,
educational inequality has an unequalizing effect on income distribution, while

educational expansion has an ambiguous effect on income distribution when
controlling for other important factors (Lee and Lee, 2018). If educational
expansion tends to reduce educational inequality, as shown in Figures 3 and 4, it
can have an additional equalizing effect on income distribution.

In order to identify the relationship among educational expansion,
educational inequality and income inequality, Lee and Lee (2018) adopt the

6 See Lee and Lee (2018) for detailed discussion.