Which distribution of income feels more unequal to you?

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$400 $200 $600 $400

$400 $200 $800 $400

A B

Education, Economics, and Inequality

An absolutist approach to measuring inequality in education attainment

Presentation to the Comparative and International Education Society

March 6, 2016

Outline

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▪ Education and Economic Thought

▪ The Distribution of Education Attainment

▪ Measuring Inequality in Education

▪ Absolute Gini Coefficients (cross-country comparisons)

▪ Gains Incidence Curves (time series comparisons)

▪ Challenges

▪ Conclusion

History of Thought

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▪ The idea of universal basic education as an economic policy is centuries old.

▪ Not accepted as an uncontroversial goal until much later.

▪ The economic role of education been formalized.

▪ Equitable expansion of education is a key to broad-based growth.

▪ But what exactly does equitable expansion mean?

Why does the level of education matter for individuals?

▪ Mincer (1958) models the private return to education.▪ Present value of earnings:

▪ Equilibrium equates V(s):

▪ Bottom line: log(w(s)) = α + β*s+ Other factors. β is the private rate of return to schooling.

▪ Implication: Proportionate differences in earnings (relative) is linear in the difference in years of schooling (absolute).

▪ This type of model is applied in hundreds of empirical studies (e.g., Montenegro and Patrinos 2014).

5

Why does the distribution of education matter for societies?

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Equity concerns

▪ Access to basic education is a human right.

▪ Basic education can be a powerful anti-poverty instrument.

Economic efficiency concerns

▪ Economic disparity could restrict cooperation so that public goods are underprovided and block efficient policies (Bardhan et al. 2000).

▪ Inequality could necessitate distortionary redistribution (Alesina and Rodrik 1994).

Why might the bottom of the distribution be especially important?▪ Equity concern: self-evident.

▪ Efficiency concern: non-linearities in the education-productivity relationship

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Implications for measurement of inequality

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▪ Averages (mean years of schooling, enrolment rates) are not enough.

▪ We should track absolute inequality to compare countries, and pay attention to how the bottom of the distribution moves over time.

▪ With this in mind, what measures can we use to make international and intertemporal comparisons of education attainment?

▪ For international comparisons: Absolute Gini Coefficients.

▪ For intertemporal comparisons: Gains Incidence Curves.

▪ They find that education inequality fell in nearly every country over. But these are relative Gini coefficients.

Cross-country comparisons: Gini Coefficients

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▪ Thomas et al. (2000) construct Gini coefficients for education attainment for 85 countries between 1960 and 1990:

▪ They find that education inequality fell in nearly every country over the 30 year period.

▪ But they look at relative Gini coefficients.

Cumulative population share (least to most educated

Cum

ulat

ive

year

s of

edu

catio

n sh

are

Complete equalityUnequal distribution

Gini = A/(A+B)

Cross-country comparisons: Gini Coefficients

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2010 AbsoluteAverage RelativeAlbania 1.1 9.85 0.11

Bulgaria 1.4 11.45 0.12

Iraq 3.08 6.38 0.48

Malawi 2.1 4.29 0.49

Niger 1.39 1.45 0.96

Serbia 1.48 10.97 0.13

Tajikistan 0.80 10.90 0.07

Tanzania 1.96 5.12 0.38

Uganda 2.31 5.42 0.43

Brazil 2.48 7.66 0.32

Mexico 2.54 8.33 0.31

Panama 2.55 9.15 0.28South Africa 1.95 9.43 0.21

Source: presenter’s calculations based on Barro and Lee (2010)

Is this distinction of practical importance?

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Mean Grade 6 completion rate

Relative gap (top/bottom quintile) Absolute gap (top-bottom quintile)

Source: Ravallion (2016)

Time series comparisons: GICs for Income

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▪ Chen and Ravallion (2003): track changes in the distribution of income using a Growth Incidence Curve (GIC).

▪ GIC shows the economic growth rate at every percentile of income.

Source: World Bank

Source: World Bank (2009)

Time series comparisons: GICs for Education

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▪ For education, it doesn’t matter whether you are a relativist or absolutist with respect to income.

▪ Even if you are a relativist for education, the Mincer model implies you must be an absolutist with respect to education.

▪ Gains Incidence Curve for Education Attainment:

▪ Source of attainment data is Filmer (2015).

▪ We can directly observe gains along the distribution of education attainment.

Often relative and absolute measures yield the same conclusion: Uganda (2000-2011)

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Source: presenter’s calculations based on Barro and Lee (2010)

But sometimes they present very different pictures: Malawi (2000-2010)

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Source: presenter’s calculations based on Barro and Lee (2010)

Challenges

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▪ Shadow education system.

▪ Need to account for quality of education (education inequality likely understated by attainment-based measures).

▪ Missing inequality between demographic groups within a country (topic of the next presentation by EPDC), which may be most relevant for policy design.

Conclusions

This supports the use of Absolute Gini Coefficients for comparing countries or sub-populations and Gains Incidence Curves for tracking changes over time.

How we think about the economics of education in theory has direct practical implications for education inequality.

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If we believe in a Mincer-like model, it is most important to track absolute inequality (regardless of whether you are an absolutist or relativist in income terms).

Thank you for your attention.

▪ Milan Thomas, Associate Fellow (mthomas@r4d.org)

Contact Information

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