Lionel Artige Laurent Cavenaile H E C - U n i v e r s i t y o f L - - PowerPoint PPT Presentation

I n t r o d u c t i o n M o d e l G r o w t h I n e q u a l i t y E m p i r i c a l R e s u l t s Q u a n t i t a t i v e E x e r c i s e C o n c l u s i o n A p p e n d i x

• P u b lic E d u c a t io n E x p e n d it u r e s , G r o w t h a n d In c o m e

In e q u a lit y

Laurent Cavenaile

U n i v e r s i t y o f T o r o n t o

Lionel Artige

H E C - U n i v e r s i t y o f L ie g e

CEPR Conference Growth and Inequality: Long-Term Effects of Short-Term Policies

T e l A v i v U n iv e r s i t y M a y 1 6 t h 2 0 1 8

I n t r o d u c t i o n

Model Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix

• O

O O O O O O O O O O O OO O O O O O O O O O O O O

I n t r o d u c t io n

a P u b li c e d u c a t io n r e p r e s e n t s a la r g e s h a r e o f G D P in m o s t c o u n t r ie s ( 5 . 6 % in t h e

U S in 2 0 1 2 )

a T w o p o t e n t i a l e f f e c t s o f p u b lic e d u c a t io n

Q I n c r e a s e g r o w t h Q D e c r e a s e i n e q u a l i t y

a M ix e d e m p ir ic a l r e s u lt s a R e c e n t r e s e a r c h e m p h a s iz in g t h e r o le o f q u a l i t y v s . q u a n t i t y o f e d u c a t io n ( e . g

M a n u e l li a n d S e s h a d r i ( 2 0 1 4 ) , H a n u s h e k a n d W o e s s m a n n ( 2 0 1 2 , 2 0 1 5 ) )

I n t r o d u c t i o n

Model Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix 0 • O O O O O O O O O O O OO O O O O O O O O O O O O

W h a t W e D o

9

R e v is it t h e r e l a t i o n s h ip b e t w e e n p u b lic e d u c a t io n , g r o w t h a n d i n e q u a l i t y in a m o d e l w i t h e n d o g e n o u s e d u c a t io n q u a l i t y (supply side) a n d o c c u p a t i o n a l c h o ic e

9 W e s h o w t h a t : Q T h e e f f e c t i v e n e s s o f p u b l i c e d u c a t i o n p o l i c y a t r a i s i n g g r o w t h d e p e n d s o n t h e H C d i s t r i b u t i o n

Q

T h e r e l a t i o n s h i p b e t w e e n p u b l i c e d u c a t i o n a n d i n e q u a l i t y is p o t e n t i a l l y n o n - m o n o t o n e ( U - s h a p e d ) 9 W e p r o v id e e m p ir ic a l e v id e n c e f o r t h o s e p r e d ic t io n s 9

Q u a n t i t a t i v e e x e r c is e : t r a d e - o f f b e t w e e n g r o w t h a n d i n e q u a l i t y t h r o u g h p u b lic e d u c a t io n p o lic ie s f o r s o m e c o u n t r ie s

Introduction

M o d e l

Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix O O

• O O O O O O O

O O O OO O O O O O O O O O O O O

M o d e l S t r u c t u r e 9 T w o - p e r i o d O v e r la p p i n g G e n e r a t io n s M o d e l o f E n d o g e n o u s G r o w t h

9 Y o u n g a g e n t s g o t o ( p u b l i c ) s c h o o l w h e n y o u n g a n d a c c u m u l a t e h u m a n c a p i t a l 9

M a s s o n e o f o ld a g e n t s w o r k a n d c o n s u m e

9

H e t e r o g e n e i t y in h u m a n c a p i t a l ( d i s t r i b u t i o n F ( h ) ) a n d o c c u p a t i o n a l c h o ic e

Q W o r k e r

Q

T e a c h e r Q M a n a g e r 9

H u m a n c a p i t a l a c c u m u l a t i o n d e p e n d s o n i n v e s t m e n t in p u b lic e d u c a t io n a n d t h e e n d o g e n o u s q u a l i t y o f t e a c h e r s

Introduction

M o d e l

Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix O O 0 * 0 0 0 0 0 0 O O O O O O O O O O O O O O O O O

S t a t ic P r o b le m : F ir m s 9 A f i r m m a t c h e d w i t h a m a n a g e r w i t h h u m a n c a p i t a l h p r o d u c e s y ( h ) = h na ,

w h e r e n a r e u n i t s o f la b o r .

9

P r o d u c t i o n is t a x e d a t a r a t e r t o f in a n c e p u b lic e d u c a t io n

9 W o r k e r s a r e p a id a w a g e w p e r u n i t o f la b o r

/ \ Q 1

9

M a n a g e r s r e c e iv e t h e p r o f i t o f t h e i r f i r m s : 7 r ( / 7 ) = ( 1 — a ) ( ^ ) [ ( 1 — r ) / 7 ] 1־״

M o d e l

Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix 0 0 * 0 0 0 0 0 O O O O O O O O O O O O O O O O O

P u b lic E d u c a t io n E x p e n d it u r e s , T e a c h e r s ’ W a g e a n d E d u c a t io n Q u a lit y 9 G o v e r n m e n t c o lle c t s t a x e s e q u a l t o r f M y ( h ) d F ( h ) , w h e r e M is t h e s e t o f

m a n a g e r s

9

T a x e s a r e u s e d t o f i n a n c e t h e w a g e o f t e a c h e r s a n d b u d g e t is b a la n c e d

9 W a g e o f t e a c h e r s : w T = T

. w h e r e T is t h e s e t o f t e a c h e r s

9

E d u c a t i o n q u a l it y : S = f T h d F ( h )

A p p e n d i x O O O O O

9

O ld - a g e u t i l i t y is g iv e n b y : u = c —

! 7 7 ( /? )

17 = 1

f o r t e a c h e r s

< (

7 " ) / 7 ,

> (

7׳)/7

l i m /,^0 7 ( h ) = 00 a n d l i m / , ^ , ^ 7 ( h ) = 0 .

9 M a x [ w , w T

— 7 ( / 7

) , 7 r ( / 7 ) ]

Q u a n t i t a t i v e E x e r c is e O O O E m p i r i c a l R e s u l t s O O O

Model 00 0 *0 0 0 0

I n t r o d u c t i o n O O

S t a t ic P r o b le m : O ld A g e n t s

Introduction

M o d e l

Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix O O 0 0 0 0 * 0 0 0 O O O O O O O O O O O O O O O O O

O c c u p a t io n a l C h o ic e : C u t o f f R u le

F i g u r e : O c c u p a t i o n a l c h o i c e

׳ y ( x ) = i׳

• : =

r = 0 . 1 , A = 1 a n d F is a l o g - n o r m a l d i s t r i b u t i o n w i t h m e a n a n d v a r i a n c e e q u a l t o o n e .

Introduction

M o d e l

Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix O O 0 0 0 0 0 * 0 0 O O O O O O O O O O O O O O O O O

C o m p a r a t iv e s t a t ic s : r

Introduction

M o d e l

Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix O O 0 0 0 0 0 0 * 0 O O O OO O O O O O O O O O O O O

D y n a m ic M o d e l

9

E m b e d t h e s t a t i c m o d e l in a n O L G f r a m e w o r k w i t h t w o p e r io d s

9 Y o u n g a g e n t s : g o

t o s c h o o l a n d a c c u m u l a t e H C

9 O l d a g e n t s : o c c u p a t i o n a l c h o i c e a s in s t a t i c m o d e l

9

E a c h o ld a g e n t h a s o n e c h ild

9

H u m a n c a p i t a l o f o ld a g e n t in f a m i l y / a t t i m e t + 1 :

u ,

_ / . f t e f t

׳ V + 1 — f t , t״! t t w h e r e a , j t

G ( a )

H u m a n C a p it a l D is t r ib u t io n

Introduction

M o d e l

Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix OO O O O O O O O • OOO OO OOO OOO O OOOOO

9 A s s u m p t io n s :

7

t ( h ) = ^ lo g (h o ) ~ A f(n o ,a Z ) lo g (a t ) ~ N { n a, a 2 a) !3! = 1

— [32

9

H u m a n C a p it a l d i s t r i b u t i o n a t t i m e t + 1 :

lo g {h t+ 1) ~ Af ( p a + /?!/it + lh lo g { S t ), a l + j3 la 2 t )

Introduction Model Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix O O O O O O O O O O

• O O

OO O O O O O O O O O O O O

B a la n c e d G r o w t h P a th Balanced Growth Path Definition:

A b a la n ce d g ro w th p a th is a d y n a m ic e q u ilib riu m in w h ic h : O h w ,t, hfj! t , S t, Y t = p y t (h ) d F t (h ), w t a n d w j a ll g ro w a t th e sam e ra te g .

Q ( P — 1 1

• !־ ־ ״

A2

Q The m ass o f w orkers, te a ch e rs a n d m a n a g e rs are c o n s ta n t.

Q u a n t i t a t i v e E x e r c is e O O O E m p i r i c a l R e s u lt s O O O M o d e l

OOOOOOOO

I n t r o d u c t i o n

OO

P u b lic E d u c a t io n a n d G r o w t h I

Inequality Growth rate

A p p e n d i x O O O O O C o n c l u s i o n

Q uantitative Exercise

O O O

M odel Growth Inequality Empirical Results O O O O O O O O O O O O • O O O O O

P u b lic E d u c a t io n a n d G r o w t h II

F i g u r e : C o m p a r a t i v e s t a t i c s a t t h e s t e a d y s t a t e : G r o w t h e f f e c t o f A t = 1 % a s a f u n c t i o n o f a a .

c n = 0 . 2 , = 0 . 4 , tp = 0 . 0 1 , /j,a = 3 a n d r = 0 . 0 5 .

»

P u b li c e d u c a t io n m o r e e f f e c t i v e a t r a is in g g r o w t h i f f a t t e r r i g h t t a i l o f H C d i s t r i b u t i o n

Introduction Model Growth

I n e q u a l i t y

Empirical Results Quantitative Exercise Conclusion Appendix O O O O O O O O O O O O O

• O

O O O O O O O O O O O O

P u b lic E d u c a t io n a n d I n e q u a lit y I

( 1 - a ( l - T ) ) ( ^ 1 ) 1״“־ /- x

d F t ( h ) 1 0 /lO r a tio t = ל — —-

0.1 w t ( 1 — q(1 —

t))(q(1 — r))1^

1

ip9■ 0) 1־) ^ l a d F t {h )

= קזר —

r t { h w , t )

!

( q ( I - t ) ) 1

• ״ / C . x־1׳׳“ d F t( h )

d ( 1 0 / 1 0 r a t / 'o )

_

Q jr e c t p r o f j f e ffe c t + D ir e c t la b o r d e m a n d e ffe c t d r

< 0

>°

+

L a b o r s u p p ly e ffe c t + M a n a g e r d is trib u tio n e ffe c t

Introduction Model Growth

I n e q u a l i t y

Empirical Results Quantitative Exercise Conclusion Appendix OO O O O O O O O O O O O O • O O O O O O O O O O O O

P u b lic E d u c a t io n a n d I n e q u a lit y II

A . In e q u a lit y D . S h a r e o f t o t a l in c o m e

F i g u r e : C o m p a r a t i v e s t a t i c s a t t h e s t e a d y s t a t e : r . a = 0 . 2 , /3 j_ = 0 . 4 , ip = 0 . 0 1 , jj,a

= 3 a n d a a = 0 , 8 5 .

Introduction Model Growth Inequality

E m p i r i c a l R e s u l t s

Q uantitative Exercise Conclusion Appendix OO O O O O O O O O O O O O O

• O O

O O O O O O O O O

T e s t in g P r e d ic t io n s o f t h e M o d e l

9

T e s t i n g G r o w t h a n d I n e q u a l it y p r e d ic t io n s o f t h e m o d e l

9

D a t a

a U S s t a t e s f o r 1 9 6 0 , 1 9 7 0 , 1 9 8 0 , 1 9 9 0 , 2 0 0 0 a n d 2 0 1 0

• D a t a o n P e r C a p i t a I n c o m e , S t a t e a n d L o c a l p u b l i c e d u c a t i o n e x p e n d i t u r e s ,

t e a c h e r w a g e s a n d m e a s u r e s o f i n e q u a l i t y

Introduction Model Growth Inequality

E m p i r i c a l R e s u l t s

Q uantitative Exercise Conclusion Appendix OO O O O O O O O O O O O O O 0 « 0 O O O O O O O O O

P u b lic E d u c a t io n a n d G r o w t h

l o g ( i n c o m e ) l o g ( i n c o m e )

P u b . E d u c . - 1

0 . 0 1 4 7

• 0 . 0 3 5 7

( 0 . 0 1 4 5 ) ( 0 . 0 2 6 7 )

C o lle g e - 1 * P u b . E d u c . - !

0 . 3 7 7 * * ( 0 . 1 8 2 ) T i m e F E Y Y C o n t r o l s Y Y O b s e r v a t i o n s 1 4 4 1 4 4

Table: G r o w t h R e g r e s s io n s :

A r e l l a n o a n d B o v e r / B l u n d e l a n d B o n d E s t i m a t e s

N o te s : U S ( c o n t i g u o u s ) s t a t e s f r o m 1 9 6 0 t o 2 0 1 0 . C o n t r o l s i n c l u d e t h e l a g o f ( l o g ) i n c o m e , p o p u l a t i o n , s c h o o l e n r o l l m e n t , s h a r e o f h i g h s c h o o l g r a d u a t e s ,

s h a r e o f c o l l e g e g r a d u a t e s , i n e q u a l i t y ( in c o m e s h a r e o f t o p 1 0 % ) , s t a t e a n d l o c a l g o v e r n m e n t s p e n d i n g ( e x c l u d i n g e d u c a t i o n ) , p o p u l a t i o n g r o w t h a n d g r o w t h o f t h e s h a r e o f h i g h s c h o o l g r a d u a t e s . G M M s t a n d a r d e r r o r s i n p a r e n t h e s i s . S i g n i f i c a n c e le v e l: * 1 0 % ; * * 5 % ; * * * 1 % .

Introduction Model Growth Inequality

E m p i r i c a l R e s u l t s

Q uantitative Exercise Conclusion Appendix OO O O O O O O O O O O O O O O O • O O O O O O O O O

P u b lic E d u c a t io n a n d I n e q u a lit y

G in i T o p 1 0 % T h e i l I n d e x G i n i T o p 1 0 % T h e i l I n d e x

P u b . E d u c . — 1

0 . 0 0 5 4 0 . 0 0 4 0 0 . 0 1 8 5

• 0 . 0 5 1 5 * * *
• 0 . 0 4 6 8 * *
• 0 . 2 1 9 *

( 0 . 0 0 3 2 ) ( 0 . 0 0 3 0 ) ( 0 . 0 1 2 6 ) ( 0 . 0 1 7 7 ) ( 0 . 0 2 2 1 ) ( 0 . 1 1 3 )

P u b . E d u c .2 !

0 . 0 0 4 7 8 * * * 0 . 0 0 4 2 8 * * 0 . 0 2 0 0 * * ( 0 . 0 0 1 4 2 ) ( 0 . 0 0 1 7 4 ) ( 0 . 0 0 9 2 1 ) T i m e F E Y Y Y Y Y Y C o n t r o l s Y Y Y Y Y Y O b s e r v a t i o n s 1 4 3 1 4 3 1 4 3 1 4 3 1 4 3 1 4 3

R 2

0 . 7 5 0 . 6 1 0 . 6 7 0 . 7 5 0 . 6 0 0 . 6 6

Table: I n e q u a l i t y R e g r e s s io n s :

F i r s t - D i f f e r e n c e E s t i m a t e s

N o te s : U S ( c o n t i g u o u s ) s t a t e s f r o m 1 9 6 0 t o 2 0 1 0 . C o n t r o l s i n c l u d e t h e l a g o f i n c o m e ( i n l o g ) , i t s s q u a r e d v a l u e , p o p u l a t i o n , s c h o o l e n r o l l m e n t , s h a r e o f h i g h

s c h o o l g r a d u a t e s a n d i n c o m e g r o w t h . S t a n d a r d e r r o r s i n p a r e n t h e s i s ( c lu s t e r e d a t t h e s t a t e l e v e l ) . S i g n i f i c a n c e le v e l: * 1 0 % ; * * 5 % ; * * * 1 % .

Introduction Model Growth Inequality Empirical Results

Q u a n t i t a t i v e E x e r c i s e

Conclusion Appendix O O O O O O O O O O O O O O O O O O

• O O

O O O O O O

Q u a n t it a t iv e E x e r c is e I

9

U s e o u r m o d e l t o e s t i m a t e t h e p o t e n t i a l t r a d e - o f f b e t w e e n G r o w t h a n d I n e q u a l it y t h r o u g h p u b l ic e d u c a t io n

9

F o c u s o n 8 O E C D c o u n t r y u s in g d a t a b e t w e e n 1 9 9 1 a n d 2 0 1 0 .

9

T a r g e t m o m e n t s r e la t e d t o g r o w t h , i n c o m e i n e q u a lit y , s o c ia l m o b i li t y , s h a r e a n d w a g e o f t e a c h e r s .

Introduction Model Growth Inequality Empirical Results

Q u a n t i t a t i v e E x e r c i s e

Conclusion Appendix O O O O O O O O O O O O O O O O O O 0 « 0 O O O O O O

Q u a n t it a t iv e E x e r c is e II

9 - -- -- -- -- -- -- -- -- -- - 1

• - - -- - - -- - - -- - - -- 1
• - -- - -- - -- - -- - -- -

< 1 2 - -- -- -- -- -- -- -- - 1 1- - -- - -- - -- - -- - -- - 1

• - - -- - - -- - - -- - - -- 1
• - - -- - -- - -- - -- - --

0 .0 5 0.1 0 .1 5 0 .2 0 .0 5 0.1 0 .1 5 0 2

• ------ In e q u a lity ( le ft a xis)
• ------- G ro w th ( righ t a x is)

F i g u r e : Q u a n t i t a t i v e E x e r c i s e : 8 O E C D C o u n t r i e s ( 1 9 9 1 - 2 0 1 0 )

Introduction Model Growth Inequality Empirical Results

Q u a n t i t a t i v e E x e r c i s e

Conclusion Appendix O O O O O O O O O O O O O O O O O O O O • O O O O O O

Q u a n t it a t iv e E x e rc is e

G r o w t h 1 n e q u a 1 i t y ( 1 0 / 1 0 r a t i o ) S e m i - e l a s t i c i t y D a t a P r e d i c t i o n A g D a t a P r e d i c t i o n

Ai'neg. A

g in e q . A u s t r a l i a 2 . 2 7 % 2 . 6 9 % 0 . 4 2 % 1 1 . 1 3 1 1 . 1 7 0 . 3 5 %

0.83

C a n a d a 1 . 6 9 % 2 . 0 9 % 0 . 4 0 % 9 . 5 3 9 . 5 7 0 . 4 8 %

1.19

F r a n c e 0 . 9 7 % 1 . 2 2 % 0 . 2 5 % 7 . 8 8 7 . 9 4 0 . 7 9 %

3.11

G e r m a n y 1 . 0 6 % 1 . 3 4 % 0 . 2 8 % 7 . 3 3 7 . 4 0 0 . 9 1 %

3.24

I t a l y 0 . 6 0 % 0 . 8 0 % 0 . 2 0 % 1 2 . 8 7 1 2 . 8 2

• 0 . 4 1 %
• 2.08

J a p a n 0 . 5 0 % 0 . 9 9 % 0 . 4 9 % 9 . 2 4 9 . 3 3 0 . 9 2 %

1.89

U K 2 . 0 7 % 2 . 2 1 % 0 . 1 5 % 1 3 . 3 8 1 3 . 3 7

• 0 . 0 5 %
• 0.32

U S 1 . 4 7 % 1 . 5 8 % 0 . 1 0 % 1 8 . 5 4 1 8 . 3 4

• 1 . 1 0 %
• 10.48

T a b l e : P r e d i c t e d c h a n g e in a n n u a l g r o w t h a n d i n e q u a l i t y a f t e r a o n e - p e r c e n t a g e - p o i n t i n c r e a s e in p u b l i c e d u c a t i o n s p e n d i n g

Introduction Model Growth Inequality Empirical Results Quantitative Exercise Conclusion Appendix O O O O O O O O O O O O O OO O O O O O O

• O O O O O

C o n c lu s io n

9 W e p r o p o s e a m o d e l o f E n d o g e n o u s G r o w t h w i t h o c c u p a t i o n a l c h o ic e a n d

e n d o g e n o u s q u a l i t y o f p u b l ic e d u c a t io n .

9 G r o w t h

Q G r o w t h d e p e n d s o n t h e r e l a t i v e h u m a n c a p i t a l o f t e a c h e r s

Q

E l a s t i c i t y o f g r o w t h t o p u b l i c e d u c a t i o n d e p e n d s o n H C d i s t r i b u t i o n 9

I n e q u a l it y

Q N e w m e c h a n i s m s l i n k i n g p u b l i c e d u c a t i o n a n d i n e q u a l i t y

Q

P o t e n t i a l l y U - s h a p e d r e l a t i o n s h i p b e t w e e n i n e q u a l i t y a n d p u b i l c e d u c a t i o n

9

P r o v id e e m p ir ic a l e v id e n c e f o r g r o w t h a n d i n e q u a l i t y p r e d i c t i o n s o f t h e m o d e l

9

C a li b r a t e t h e m o d e l t o O E C D c o u n t r ie s a n d s h o w t h a t s o m e c o u n t r ie s f a c e a t r a d e - o f f b e t w e e n g r o w t h a n d i n e q u a l i t y t h r o u g h p u b lic e d u c a t io n

Introduction Model Growth Inequality Empirical Results Quantitative Exercise Conclusion

A p p e n d i x

O O O O O O O O O O O O O OO O O O O O O O

• O O O O

D y n a m ic E q u ilib r iu m

Dynamic Equilibrium Definition: G iven a n in itia l d is tr ib u tio n o f h u m a n c a p ita l Fq : R + — )0 , 1 ] ׳], a

d is tr ib u tio n fo r th e s h o c k a ( G ) a n d a ta x ra te ( r ) , a d y n a m ic e q u ilib riu m is a s e q u e n c e o f w ages ( w t, w j , 7 T t(h )), c u to ffs ( h w t , by! t ) , d e m a n d fo r w o rk e rs ( n t ( h ) ) , e d u c a tio n q u a lity ( S t) a n d fin a l g o o d p r o d u c tio n ( y t ( h ) ) so th a t, a t e v e ry p e rio d :

Q G ive n w ages, firm s m a x im iz e p r o fit. O G ive n w ages, a g e n ts m a x im iz e u t ilit y b y fo llo w in g a c u t o f f s tr a te g y in w h ic h a g e n ts w ith

h u m a n c a p ita l in [0, h w t ) b e c o m e w o rke rs, a g e n ts w ith h u m a n c a p ita l in [ h / / tל t ) are te a c h e rs a n d a g e n ts w ith h u m a n c a p ita l a b o v e hy! t w o rk as m a n a g e rs . Q L a b o r m a rk e t clea rs: ^ ^ t ( h ) d F t( h ) = f Q W ,t d F t(h )

O G o v e rn m e n t b u d g e t is b a la n c e d :

WJ d F t ( h ) = ^ r y t (h ) d F t ( h) Q E d u c a tio n q u a lity is g iv e n b y : S t = h d F t (hi)

Q H u m a n c a p ita l in th e e c o n o m y e v o lv e s as: h;>t+! = a ;h ? ^ S ^ 2

A p p e n d i x

0 *0 0 0

D e p . w ar.:

Top 1 0 % Top 2 0 %

1 0 /1 0 ratio 2 0 /2 0 ratio

gini gin i SWIID

• pub. sduc.
• 4 .7 1 3 * *
• 4 .9 8 8 * *
• 9 9 1 .3
• 4 4 6 .2 * *
• 5 .3 7 7 * *
• 4 .8 2 8 * * *

(2 .1 1 2 ) ( 2 .1 0 7 ) ( 6 4 1 .2 ) (2 1 6 .6 ) (2 .5 8 2 ) ( 1 .7 1 2 )

• pub. sduc.2

5 8 .1 4 ** 6 0 .4 9 ** 1 2 4 1 0 .2 * 5 3 5 8 .6 ** 6 6 .7 2 ** 5 0 .5 2 * * (2 4 .2 7 ) (2 3 .8 7 ) ( 6 5 6 1 .3 ) ( 2 3 4 0 .7 ) (2 8 .8 1 ) ( 1 9 .3 8 )

GDP ( $ 1 0 0 0 )

• 0 .0 0 5 2 0 **
• 0 .0 0 5 0 6 **
• 1 .3 0 9 *
• 0 .4 6 6 * *
• 0 .0 0 5 0 9 *

0 .0 0 1 0 1 (0 .0 0 2 2 1 ) ( 0 .0 0 2 3 2 ) ( 0 .6 8 3 ) ( 0 .2 3 1 ) ( 0 .0 0 2 8 0 ) (0 .0 0 2 5 6 )

GDP2

0.0 0 0 0 1 5 6 0 .0 0 0 0 1 1 8 0 .0 0 5 7 4 0.00 16 1

• 0 .0 0 0 0 0 7 2 7
• 0 .0 0 0 0 6 9 0

( 0 .0 0 0 0 3 5 2 ) ( 0 .0 0 0 0 3 6 2 ) ( 0 .0 0 9 4 7 ) (0 .0 0 3 4 1 ) (0 .0 0 0 0 4 3 7 ) ( 0 .0 0 0 0 4 5 4 )

growth

• 0 .3 9 4
• 0.3 0 6
• 7 3 .7 3
• 2 6 .3 5
• 0 .4 1 4
• 0 .0 7 7 8

(0 .2 9 9 ) (0 .3 1 5 ) ( 1 0 7 .7 ) ( 3 6 .0 1 ) (0 .3 9 3 ) ( 0 .3 0 1 )

school

0.0 0 0 4 7 8 0.0 0 0 8 5 8 1.096 0 .1 9 1 0.0 0 1 5 8

• 0 .0 0 1 5 0

(0 .0 0 3 4 6 ) ( 0 .0 0 3 4 9 ) ( 0 .9 9 0 ) ( 0 .3 2 9 ) ( 0 .0 0 4 3 0 ) (0 .0 0 3 2 8 )

pub.sxp.

• 0 .1 9 7
• 0 .2 1 5
• 55 .91
• 8 .5 0 0
• 0.3 3 6

0 .16 7 (0 .1 9 4 ) (0 .2 0 8 ) ( 5 4 .1 6 ) (2 0 .7 7 ) (0 .2 5 5 ) ( 0 .1 8 5 )

• pen
• 0 .0 1 4 6
• 0 .0 1 0 3
• 2.6 3 1
• 1 .0 9 6
• 0 .0 1 0 6
• 0 .0 1 9 5

( 0 .0 2 1 1 ) ( 0 .0 2 2 2 ) ( 7 .8 2 3 ) (2 .3 5 0 ) (0 .0 2 7 4 ) ( 0 .0 1 9 1 )

civil right

• 0 .0 2 0 2 * * *
• 0 .0 2 1 4 * * *
• 5 .1 1 7 * * *
• 1 .9 1 7 * * *
• 0 .0 2 6 0 ** *
• 0 .0 2 1 8 * * *

(0 .0 0 5 6 1 ) ( 0 .0 0 5 9 3 ) ( 1 .6 7 4 ) ( 0 .5 7 2 ) ( 0 .0 0 7 2 1 ) (0 .0 0 6 0 1 )

priv.crsd.

0 .0 6 0 4 ** 0 .0 5 8 4 ** 1 9 .6 2 ** 6 .5 0 5 ** 0 .0 6 5 5 ** 0.04 12 ( 0 .0 2 4 0 ) ( 0 .0 2 6 4 ) ( 8 .6 6 0 ) (2 .6 7 4 ) (0 .0 3 2 6 ) ( 0 .0 2 6 9 )

• pop. growth

2 .5 8 6 * * * 2 .7 4 0 * * * 5 7 9 .6 ** 2 0 4 .3 * * * 3 .3 9 7 * * * 1 .9 5 8 * * (0 .7 1 3 ) (0 .7 0 8 ) ( 2 2 8 .1 ) (6 8 .9 7 ) (0 .8 5 4 ) ( 0 .7 6 3 ) Q u a n t i t a t i v e E x e r c is e O O O E m p i r i c a l R e s u l t s O O O M o d e l O O O O O O O O I n t r o d u c t i o n O O

C o u n t r y R e g r e s s io n s

Introduction Model Growth Inequality Empirical Results Quantitative Exercise Conclusion

A p p e n d i x O O O O O O O O O O O O O O O O O O O O O O

• »
• T e a c h e r W a g e a n d I n e q u a lit y

G i n i T o p 1 0 % T h e i l I n d e x

lo g ( T e a c h , w a g e — ! )

• 3 . 3 6 6 * * *
• 1 . 7 1 7
• 9 . 1 0 1 *

( 0 . 8 8 5 ) ( 1 . 0 3 1 ) ( 5 . 1 1 1 )

lo g ( T e a c h , w a g e _ ! ) 2

0 . 1 5 7 * * * 0 . 0 8 1 5 * 0 . 4 2 7 * ( 0 . 0 4 0 6 ) ( 0 . 0 4 7 3 ) ( 0 . 2 3 5 ) T i m e F E Y Y Y C o n t r o l s Y Y O b s e r v a t i o n s 1 4 3 1 4 3 1 4 3

R 2

0 . 7 5 0 . 6 0 0 . 6 6

Table: I n e q u a l i t y R e g r e s s io n s :

F i r s t - D i f f e r e n c e E s t i m a t e s

N o te s : U S ( c o n t i g u o u s ) s t a t e s f r o m 1 9 6 0 t o 2 0 1 0 . C o n t r o l s i n c l u d e t h e l a g o f i n c o m e ( i n l o g ) , i t s s q u a r e d v a l u e , p o p u l a t i o n , s c h o o l e n r o l l m e n t , s h a r e o f h i g h

s c h o o l g r a d u a t e s a n d i n c o m e g r o w t h . S t a n d a r d e r r o r s i n p a r e n t h e s i s ( c lu s t e r e d a t t h e s t a t e l e v e l ) . S i g n i f i c a n c e le v e l: * 1 0 % ; * * 5 % ; * * * 1 % .

'ical Results Quantitative Exercise Conclusion

A p p e n d i x O O O O * 0 G e r m a n y D a ta M o d e l 0 . 2 3 0 . 2 3 7 . 3 7 . 3 0 . 0 5 0 .0 7 1 . 0 4 1 .0 4 0 . 3 2 0 .3 2 F r a n c e D a ta M o d e l 0 .2 1 0 .2 1 7 . 9 7 . 9 0 . 0 6 0 . 0 3 1 . 0 3 1 . 0 3 0 .4 1 0 .4 1 C a n a d a D a ta M o d e l 0 . 4 0 0 .4 0 9 . 5 9 .5 0 . 0 6 0 . 0 9 1 . 0 3 1 . 0 9 0 . 1 9 0 . 1 9 U S D a ta M o d e l 0 . 3 4 0 . 3 4 1 3 .5 1 3 .5 0 . 0 9 0 . 1 3 1 . 0 2 1 . 0 3 0 . 4 7 0 .4 7 U K D a ta M o d e l 0 .5 1 0 .5 1 1 3 .4 1 3 .4 0 . 0 3 0 . 1 0 1 .1 1 1.1 1 0 . 5 0 0 .5 0 J a p a n D a ta M o d e l

0.1 1 .1 1

9 . 2 9 . 2 0 . 0 4 0 .0 5 1 . 2 5 1 .2 5 0 . 3 4 0 . 3 4

E m p i i O O O I n e q u a l i t y

O O

I n t r o d u c t i o n M o d e l G r o w t h O O O O O O O O O O O O O

C a lib r a t io n r e s u lt s

A u s t r a l i a D a t a M o d e l G D P g r o w t h 0 . 5 7 0 . 5 7 1 0 / 1 0 r a t i o 1 1 .1 1 1 .1 S h a r e o f t e a c h e r s 0 . 0 7 0 . 0 3 T e a c h e r w a g e r e l a t iv e t o o t h e r w o r k e r s 1 . 1 4 1 . 1 4 i n c o m e e l a s t i c i t y 0 . 2 6 0 . 2 6 It a ly D a t a M o d e l G D P g r o w t h 0 . 1 3 0 . 1 3 1 0 / 1 0 r a t i o 1 2 . 9 1 2 . 9 S h a r e o f t e a c h e r s 0 . 0 6 0 . 0 9 T e a c h e r w a g e r e l a t iv e t o o t h e r w o r k e r s 1 . 0 1 1 . 0 2 i n c o m e e l a s t i c i t y 0 . 5 0 0 . 5 0

Table: T a r g e t e d m o m e n t s :

m o d e l v s d a t a

Empirical Results Quantitative Exercise Conclusion

A p p e n d i x

O O O O O O O O O O O •

G e r m a n y I t a l y J a p a n U K U S 0 . 5 9 7 0 . 3 8 6 0 . 4 8 9 0 . 3 9 6 0 . 3 0 1 0 . 6 0 4 0 . 7 3 7 0 . 5 4 2 0 . 7 6 7 0 . 8 2 8 0 . 1 6 5 0 . 0 1 8 0 . 4 1 4 0 . 1 3 0 0 . 0 1 5 0 . 5 3 1 0 . 3 6 5 0 . 8 6 5 0 . 5 4 2 0 . 3 3 1 1 . 0 1 8 1 . 0 3 0 1 . 0 1 9 1 . 0 5 9 1 . 0 9 3

I n e q u a l i t y

O O

I n t r o d u c t i o n M o d e l G r o w t h O O O O O O O O O O

• P a r a m e t e r V a lu e s

A u s t r a l i a C a n a d a F r a n c e

a

0 . 4 3 4 0 . 4 8 9 0 . 5 2 8

!31

0 . 4 1 7 0 . 3 3 8 0 . 6 2 4

V׳0.1780.1400.119

A a 1 .0 8 5 0 . 9 8 2 0 . 7 2 5

3־01.2551.2150.820

Table: P a r a m e t e r v a l u e s