EDUCATIONAL EXPANSION AND THE INEQUALITY OF PAY: COLOMBIA 1973–78†
| Author | Rakesh Mohan,Richard Sabot |
| Date | 01 May 1988 |
| Published date | 01 May 1988 |
| DOI | http://doi.org/10.1111/j.1468-0084.1988.mp50002005.x |
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 50,2(1988)
0305-9049 S3.00
EDUCATIONAL EXPANSION AND THE
INEQUALITY OF PAY: COLOMBIA 1973-78t
Rakesh Mohan and Richard Sabot
In this note we apply to Colombia the method used in a recent paper by
Knight and Sabot (1983) to measure the influence of educational expansion
on the inequality of pay in East Africa. Their analysis was conducted within
a framework first suggested by Kuznets (1955) and elaborated by Robinson
(1976). Kuznets' hypothesis, subsequently confirmed by cross-country com-
parisons and by intertemporal comparisons within particular countries (see
Ahluwalia (1986) and Ahluwalia et al. (1979)) was that in the process of
economic development the inequality of income will first increase and later
decrease.1 His hypothesis was based on a two-group model in which the
change in the composition of the labour force as people transfer from a low-
to a high-income sector initially raises inequality, but eventually lowers it as
fewer low-income people remain.
Knight and Sabot considered the effect on inequality of the change in the
educational composition of the labour force. They also considered the effect
on inequality of the compression of the between-group income differential
that is likely to occur in competitive labour markets as a consequence of the
increase in the relative supply of more educated workers.2 The change in the
educational composition of the labour force may, ceteris paribus, increase the
inequality of pay; the narrowing of the educational structure of wages should,
ceteris pari bus, decrease inequality. Therefore it is not possible to determine a
priori the net effect on inequality of educational expansion. Knight and Sabot
found that in East Africa the composition effect tended to increase inequality.
They found the compression effect to be the more powerful, however: the net
effect of educational expansion was to decrease inequality.
Secondary and tertiary education in Colombia expanded rapidly during
the 1 970s. Did the consequent increase in the relative supply of educated
workers compress the educational structure of wages? Did the consequent
change in the educational composition of the labour force tend to increase
the inequality of pay? Was the compression effect on inequality sufficient to
outweigh the composition effect? Comparable data from Bogota, Colombia
f The views presented here are those of the authors. They should flot be interpreted as
reflecting those of the World Bank. We thank the editors for helpful comments and Sung Yung
Kang for research assistance.
For a recent critical assessment of the evidence, see also Saith (1984).
2Kuznets concentrated on the 'composition effect' and did not incorporate any resulting
'compression' effect on the intersectoral income differential.
175
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