Education, inequality, and development in a dual economy

Yuki, Kazuhiro (2013): Education, inequality, and development in a dual economy.

Abstract

In the post-WWII era, most developing economies had decent but not spectacular growth. The great majority of them are unlikely to transform into developed economies in near future, judging from current income levels and growth trends and the following facts. (i) The dual economic structure (the coexistence of the modern/formal sector and the traditional/informal sector) is persistent. (ii) The educational level increased greatly, but the growth of the skill level, especially when measured by the share of high-skill workers, is modest. (iii) While wage inequality between workers with and without basic skills fell greatly, the inequality between workers with basic skills and with advanced skills rose over time, which might indicate that basic education has become less effective in mitigating poverty but taking further education is increasingly difficult for the poor.

Why is the growth experience of typical developing economies unspectacular? How is it related to the facts on economic structure, skill accumulation, and inequality? What differentiates a small number of economies succeeding in the transformation from them? To tackle these questions, this paper develops a dynamic dual-economy model and examines how the long-run outcome of an economy depends on the initial distribution of wealth and sectoral productivity.

• Item Type: MPRA Paper
• Language: English
• 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

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