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The Effect of Human Capital on Income Equality: Cross-sectional Analysis

Year 2022, Volume: 6 Issue: 1, 183 - 199, 31.05.2022
https://doi.org/10.30561/sinopusd.1085223

Abstract

ABSTRACT
The objective of this study is to investigate the effect of human capital on equality of income distribution. To this end, we use cross-sectional data analysis on a sample consisting of 89 countries with data in 2018. We construct an equation of income equality and next empirically estimate that equation. Human capital is proxied by gross enrolment rate of tertiary education whereas income equality is proxy by the ratio of the income share held by the lowest 10% (of the population) to the income share held by the highest 10% (of the population). In order to control the development level of countries, we added per capita income and its squared term into the equation. Moreover, the variables of technological development, openness and unemployment were added into the equation to control other factors such as demand- and supply-side. The results suggest strong evidence towards significant and positive effect of human capital on income equality. As policy implication, it is strongly recommended to encourage individuals to invest their education level, as the results indicate that countries with a high stock of human capital experience higher level of income equality. In addition, raising the trade volume, increasing the share of research and development expenditures in GDP, and promoting policies to reduce the unemployment rate are other substantial outputs of our empirical analysis.

References

  • Becker, G. S. (1962). Investment in human capital: A theoretical analysis. Journal of political economy, 70(5, Part 2), 9-49.
  • Becker, G. S., & Chiswick, B. R. (1966). Education and the Distribution of Earnings. The American Economic Review, 56(1/2), 358-369.
  • Chakraborty, S., & Das, M. (2005). Mortality, Human Capital and Persistent Inequality. Journal of Economic Growth, 159-192.
  • Chiu, W. H. (1998). Income inequality, human capital accumulation and economic performance. The Economic Journal, 108(446), 44-59.
  • Eckstein, Z., & Zilcha, I. (1994). The effects of compulsory schooling on growth, income distribution and welfare. Journal of Public Economics, 54(3), 339-359.
  • Eicher, T. S., & Garcia-Penalosa, C. (2001). Inequality and growth: the dual role of human capital in development. Journal of Development Economics, 66(1), 173-197.
  • Fields, G. S. (1980). Education and income distribution in developing countries: A review of the literature. Washigton, DC: The World Bank, 231-315.
  • Galor, O. (2011, May). Equality, human capital formation and the process of development. NBER Working Paper Series, 1-62.
  • Glomm, G., & Ravikumar, B. (1992). Public versus private investment in human capital: endogenous growth and income inequality. Journal of political economy, 100(4), 818-834.
  • Gylfason, T., & Zoega, G. (2003). From Education to Equality and Growth. CEPR Discussion Paper.
  • Lemieux, T. (2006). Postsecondary education and increasing wage inequality. American Economic Review, 96(2), 195-199.
  • Marin, A., & Psacharopoulos, G. (1976). Schooling and income distribution. The Review of Economics and Statistics, 332-338.
  • Mincer, J. (1974). Progress in human capital analysis of the distribution of earnings. (No. w0053): National Bureau of Economic Research.
  • Park, K. H. (1996). Educational Expansion and Educational Inequality on Income Distribution. Economics of education review, 15(1), 51-58.
  • Rustichini, A., & Schmilz Jr, J. A. (1991). Research and imitation in long-run growth. Journal of Monetary Economics, 27(2), 271-292.
  • Schultz, T. (1961). Investment in human capital. The American Economic Review, 51(1), 1-17.
  • Smith, A. (1776). Of the division of labour. Classics of organization theory, 40-45.
  • World Bank, World Development Indicators. (2021). https://data.worldbank.org/

THE EFFECT OF HUMAN CAPITAL ON INCOME EQUALITY: CROSS-SECTIONAL ANALYSIS

Year 2022, Volume: 6 Issue: 1, 183 - 199, 31.05.2022
https://doi.org/10.30561/sinopusd.1085223

Abstract

ÖZ
Bu çalışmanın amacı, beşeri sermayenin gelir dağılımı eşitliği üzerindeki etkisini araştırmaktır. Bu amaçla, 2018 yılı verilerine sahip 89 ülkeden oluşan örneklem üzerinde yatay kesit veri analizi kullanılmaktadır. Öncelikle bir gelir eşitliği denklemi oluşturularak daha sonra bu denklem ampirik olarak tahmin edilmiştir. Beşeri sermaye değişkeni olarak yükseköğretimin brüt okullaşma oranı kullanılırken, gelir eşitliği değişkeni olarak, en düşük gelire sahip nüfusun %10'luk kesiminin gelirden aldığı payın, en yüksek gelire sahip nüfusun %10'luk kesiminin gelirden aldığı paya oranı kullanılmıştır. Ülkelerin gelişmişlik düzeylerini kontrol edebilmek için kişi başına düşen geliri ve gelirin karesini denkleme dahil ettik. Ayrıca, talep ve arz yönlü diğer faktörlerin kontrolünü sağlamak adına teknolojik gelişmişlik, dışa açıklık ve işsizlik gibi değişkenleri de denkleme eklendi. Analiz sonuçları, beşeri sermaye stokunun gelir eşitliği üzerindeki önemli ve olumlu etkisine dair güçlü kanıtlar ortaya koymaktadır. Bu sebeple politika önerisi olarak, bireyleri eğitim seviyelerine yatırım yapmaya teşvik edilmeleri gerektiği öne sürülmektedir. Çünkü analiz sonuçları, yüksek insan sermayesi stokuna sahip ülkelerin daha yüksek düzeyde gelir eşitliği düzeyine sahip olduğunu ortaya koymaktadır. Ayrıca ticaret hacminin artırılması, araştırma ve geliştirme harcamalarının GSYİH içindeki payının artırılması ve işsizliğin azaltılmasına yönelik politikaların teşvik edilmesi gibi öneriler ampirik analizimizin diğer önemli çıktılarıdır.

References

  • Becker, G. S. (1962). Investment in human capital: A theoretical analysis. Journal of political economy, 70(5, Part 2), 9-49.
  • Becker, G. S., & Chiswick, B. R. (1966). Education and the Distribution of Earnings. The American Economic Review, 56(1/2), 358-369.
  • Chakraborty, S., & Das, M. (2005). Mortality, Human Capital and Persistent Inequality. Journal of Economic Growth, 159-192.
  • Chiu, W. H. (1998). Income inequality, human capital accumulation and economic performance. The Economic Journal, 108(446), 44-59.
  • Eckstein, Z., & Zilcha, I. (1994). The effects of compulsory schooling on growth, income distribution and welfare. Journal of Public Economics, 54(3), 339-359.
  • Eicher, T. S., & Garcia-Penalosa, C. (2001). Inequality and growth: the dual role of human capital in development. Journal of Development Economics, 66(1), 173-197.
  • Fields, G. S. (1980). Education and income distribution in developing countries: A review of the literature. Washigton, DC: The World Bank, 231-315.
  • Galor, O. (2011, May). Equality, human capital formation and the process of development. NBER Working Paper Series, 1-62.
  • Glomm, G., & Ravikumar, B. (1992). Public versus private investment in human capital: endogenous growth and income inequality. Journal of political economy, 100(4), 818-834.
  • Gylfason, T., & Zoega, G. (2003). From Education to Equality and Growth. CEPR Discussion Paper.
  • Lemieux, T. (2006). Postsecondary education and increasing wage inequality. American Economic Review, 96(2), 195-199.
  • Marin, A., & Psacharopoulos, G. (1976). Schooling and income distribution. The Review of Economics and Statistics, 332-338.
  • Mincer, J. (1974). Progress in human capital analysis of the distribution of earnings. (No. w0053): National Bureau of Economic Research.
  • Park, K. H. (1996). Educational Expansion and Educational Inequality on Income Distribution. Economics of education review, 15(1), 51-58.
  • Rustichini, A., & Schmilz Jr, J. A. (1991). Research and imitation in long-run growth. Journal of Monetary Economics, 27(2), 271-292.
  • Schultz, T. (1961). Investment in human capital. The American Economic Review, 51(1), 1-17.
  • Smith, A. (1776). Of the division of labour. Classics of organization theory, 40-45.
  • World Bank, World Development Indicators. (2021). https://data.worldbank.org/
There are 18 citations in total.

Details

Primary Language English
Journal Section Araştırma Makaleleri
Authors

Bahar Taş 0000-0002-1743-2358

Publication Date May 31, 2022
Submission Date March 25, 2022
Published in Issue Year 2022 Volume: 6 Issue: 1

Cite

APA Taş, B. (2022). The Effect of Human Capital on Income Equality: Cross-sectional Analysis. Sinop Üniversitesi Sosyal Bilimler Dergisi, 6(1), 183-199. https://doi.org/10.30561/sinopusd.1085223
This work is licensed under a Creative Commons BY-NC-SA 2.0 (Attribution-Non Commercial-Share Alike).