Education expansion, income inequality and structural transformation: evidence from OECD countries

Lalley, C. ORCID: 0000-0002-7657-986X and Makhlouf, Y. ORCID: 0000-0001-7737-3153, 2023. Education expansion, income inequality and structural transformation: evidence from OECD countries. Social Indicators Research. ISSN 0303-8300

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We study the relationship between educational inequality, income inequality and economic transformation using data of 20 OECD countries from 1870 to 2016. Our results show that educational expansion policies increase income inequality in the long run, while having no significant effect on the short run. The structural transformation suggested by Kuznets (1955) explains this potentially counter intuitive result, where contemporary policy, given its focus on the importance of increasing participation and expanding education, must be predicated on the notion that education expansion should decrease income inequality. We quantify the impact of educational inequality on employment in different sectors and find that education expansion promotes the structural transformation towards a higher wage disparity sector. Particularly, expanding education increases the employment in the service sector and reduces the employment in the agriculture sector. Overall, our findings suggest that educational expansion policies play an important role in economic development via promoting the structural transformation, though this leads to higher income inequality. That education expansion is ineffective in reducing income inequality, and instead exacerbates it in the long run, requires significant policy revision despite the popularity of such policies.

Item Type: Journal article
Publication Title: Social Indicators Research
Creators: Lalley, C. and Makhlouf, Y.
Publisher: Springer
Date: 1 July 2023
ISSN: 0303-8300
Rights: © the author(s) 2023. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit
Divisions: Schools > Nottingham Business School
Record created by: Jonathan Gallacher
Date Added: 27 Jun 2023 13:27
Last Modified: 06 Jul 2023 09:26

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