Does Educational Expansion Reduce Income Inequality?

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Abstract

Educational expansion has been highly justified by policymakers and international institutions as an extremely effective tool for lessening income inequality. However, both theoretical and empirical studies suggest that the relationship between education and income inequality is not always clear. This article examines the link between education expansion and income inequality over a period of twenty years by applying the Mincer equation to the Mauritian data. Data from the Continuous Multipurpose Household Survey is regressed through the application of ordinary least squares methods. The results reveal that the returns to education have remained fairly constant over the period under study and have revolved around 12 percent. A concave pattern of returns to education, supporting diminishing returns to education, could be observed from 1999 to 2016, with the highest returns to education coming from primary schooling. Yet, beyond 2016, the concave relationship was no longer visible, and the higher returns were associated with tertiary education compared to primary and upper secondary education, a result that can be attributed to skill mismatch, technological expansion, and further structural changes. The findings also reveal that technological advancement in Mauritius has been both skill-biased and routine-biased.