Vienna University of Economics and Business – Research Institute for Human Capital and Development
Wittgenstein Centre for Demography and Global Human Capital
On the one hand, education is able to compensate for congenital differences as well as educational gaps arising in early childhood. Equal access to education therefore secures equality of opportunities. On the other hand, education constitutes the foundation of individuals’ professional careers and affects, among other things, life-time income and health – hence well-being over the whole life-cycle. But if education is unequally distributed among the society, only a small share of the population has the opportunity to benefit from these strong positive returns at the individual level. The full spillover and welfare enhancing effects of education are thus not reached at the aggregate level. However, until now, not much attention has been devoted to the distributional dimension of education. Yet, allowing for the second moment should greatly improve our understanding of population dynamics as well as the mechanics and channels linking education to economic outcomes in a broad sense, including not only economic growth but also income inequality, poverty, democracy and political instability. Estimating the degree of inequality by Gini Coefficients of Educational attainment in a panel of 175 countries reveals that huge educational gaps exist between various groups within countries. Beyond that, we find educational inequality to negatively affect economic growth through its adverse effect on the macro return to education, i.e. the higher the degree of inequality, the lower the positive effect on growth.