Changes in returns to education in Latin America: the role of demand and supply of skills

Manacorda, Marco, Sanchez-Paramo, Carolina and Schady, Norbert (2005) Changes in returns to education in Latin America: the role of demand and supply of skills. CEPDP (712). London School of Economics and Political Science. Centre for Economic Performance, London, UK. ISBN 0753019116

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Abstract

Changes in the relative wages of workers with different amounts of education have profound implications for developing countries, where initial levels of inequality are often very high. In this paper we use micro data for five Latin American countries over the 1980s and 1990s to document trends in men's returns to education, and to estimate whether the changes in skill premia we observe can be explained by supply or demand factors. We propose a model of demand for skills with three production inputs, and we allow the elasticity of substitution between the different educational inputs to be different using a nested CES function. Using this model, we show that the dramatic expansion in secondary school in many countries in Latin America depressed the wages of workers with secondary school. We also show that there have been sharp increases in the demand for more skilled workers in the region.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk
Additional Information:	© 2005 the authors
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HD Industries. Land use. Labor
JEL classification:	J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources; Human Development; Income Distribution; Migration J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J23 - Employment Determination; Job Creation; Demand for Labor; Self-Employment
Date Deposited:	23 Jul 2008 13:50
Last Modified:	15 Sep 2023 23:00
URI:	http://eprints.lse.ac.uk/id/eprint/19874

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