Yuki, Kazuhiro (2012): Education, inequality, and development in a dual economy.
Download (609kB) | Preview
In the post-WWII era, most developing economies had decent economic growth, but, with current growth trends, the great majority of them are unlikely to transform into developed economies in near future. In these economies, the dual economic structure, the coexistence of the modern/formal sector and the traditional/informal sector, is persistent. The educational level of the population increased greatly, but the growth of the skill level, especially when measured by the share of high-skill workers, is relatively modest. Wage inequality between workers with basic skills and with advanced skills rose over time, while the inequality between workers with and without basic skills fell greatly.
In order to understand these facts, this paper develops a dynamic dual-economy model and examines how the long-run outcome of the economy depends on the initial distribution of wealth and sectoral productivity. It is shown that, for fast transformation into a developed economy, the initial distribution must be such that extreme poverty is not prevalent and the size of ”middle class” is enough. If the former is satisfied but the latter is not, which would be the case for many developing economies falling into ”middle income trap”, the fraction of workers with basic skills and the share of the modern sector rise, but inequality between workers with advanced skills and with basic skills worsens and the traditional sector remains, consistent with the above-mentioned facts.
|Item Type:||MPRA Paper|
|Original Title:||Education, inequality, and development in a dual economy|
|Keywords:||dual economy, modernization, education, wealth distribution|
|Subjects:||J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials
O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements
O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration
|Depositing User:||Kazuhiro Yuki|
|Date Deposited:||27. May 2012 19:59|
|Last Modified:||10. Sep 2015 08:13|
 Alfo, M., G. Trovato, and R. J. Waldman (2008), ”Testing for country heterogeneity in growth models using a finite mixture apporach,” Journal of Applied Econometics 23, 487−514.
 Banerjee, A., Newman A. (1998), ”Information, the dual economy, and development,” Review of Economic Studies 65 (4), 631−53.
 Colclough, C., G. Kingdon, and H. Patrinos (2010), ”The changing pattern of wage returns to education and its implications,” Development Policy Review 28 (6), 733−747.
 Deininger, K. and P. Olinto (2000), ”Asset distribution, inequality, and growth,” mimeo, World Bank.
 Easterly, W. (2001), ”The middle class consensus and economic development,” Journal of Economic Growth 6 (4), 317−35.
 Galor, O. and J. Zeira (1993), ”Income distribution and macroeconomics”, Review of Economic Studies 60 (1), 35−52.
 Hanushek, E. A. and L. Woessmann (2008), ”The role of cognitive skills in economic development,” Journal of Economic Literature 46 (3), 607–668.
 Hanushek, E.A. and L. Woessmann, (2009), ”Do better schools lead to more growth? Cognitive skills, economic outcomes, and causation,” NBER Working Paper 14633.
 La Porta, R. and A. Shleifer (2008), “The unofficial economy and economic development,” Brookings Papers on Economic Activity Fall, 275−352.
 Lucas, R.E. Jr. (2004),“Life earnings and rural-urban migration,” Journal of Political Economy 112 1(2), S29−S59.
 OECD (2009), Is Informal Normal? Towards More and Better Jobs, OECD, Paris.
 Owen, A. L., J. Videras, and L. Davis (2009), ”Do all countries follow the same growth process?,” Journal of Economic Growth 14, 265−286.
 Proto, E. (2007), ”Land and the transition from a dual to a modern economy,” Journal of Development Economics 83, 88−108.
 Psacharopoulos, G. and Patrinos, H. A. (2004), ”Returns to investment in education: A further update,” Education Economics 12 (2), 111-134.
 van Paap, R., Franses, P.H., and Dijk, D. (2005), ”Does Africa grows lower than Asia, Latin America and the Middle East? Evidence from a new data-based classification method,” Journal of Development Economics 77, 553−570.
 Vollrath, Dietrich (2009), ”The dual economy in long-run development,” Journal of Economic Growth 14, 287−312.
Wang, P. and D. Xie (2004), ”Activation of a modern industry,” Journal of Development Economics 73 (2), 393−410.
Wood, A. (1994), North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World. Oxford: Oxford University Press.
 Yuki, K. (2007), ”Urbanization, informal sector, and development,” Journal of Development Economics 84, 76−103.
 Yuki, K. (2008), ”Sectoral shift, wealth distribution, and development,” Macroeconomic Dynamics 12 (4), 527−559.
Available Versions of this Item
Education, inequality, and development in a dual economy. (deposited 27. May 2012 19:59)
- Education, inequality, and development in a dual economy. (deposited 24. Nov 2012 11:40)