## Why Education Policies Matter for Equality

_IMF Blog, September 8, 2014_

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## Bibliographic details
- Authors: Era Dabla-Norris
- Published: September 8, 2014

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### Overview
- Author: Era Dabla-Norris
- Date: September 8, 2014
- Central claim: Improvements in education—even more than factors such as government expenditure or financial sector development—have contributed in an important way to reducing income inequality within countries.

### Growth–equality nexus
- Examines whether a country’s income distribution becomes more equal as it grows richer.
- Key empirical finding:
  - A one percent increase in GDP per capita reduces the Gini coefficient—a measure of income inequality that ranges from 0 for perfect equality to 1 for absolute inequality—by around 0.08 percentage points.
- Distributional effects of growth:
  - Growth in a country’s GDP boosts the relative income share of the poor and the middle class at the expense of the richest 20 percent.
  - These results hold true across regions and across different stages of development.
- Education identified as a key channel through which increased prosperity helps reduce inequality.

### Role of technology
- Technology and globalization can increase labor income and earnings inequality, despite overall growth reducing inequality.
- Mechanisms:
  - Technological change advantages those adept at working with computers and information technology.
  - Global supply chains move low-skilled jobs out of advanced economies, depressing prospects of workers who previously held these jobs; initial beneficiaries in destination countries are often more skilled workers.
- Policy-relevant implication:
  - Better education helps individuals cope with technological and environmental changes that affect productivity and is the best policy to help countries avoid the inequality-increasing effects of technological change and globalization.

### Policy implications and recommendations
- For advanced economies (example: United States):
  - Increase the supply of highly educated workers.
  - Address high school dropout rates and the share of high school graduates who are not college-ready.
  - Tackle the high cost of higher education that is prohibitively expensive for many families.
- For developing countries:
  - Raise levels of educational attainment where access to basic education remains constrained by market failures and inefficient policies.
  - Promote equal access to basic education through policies such as cash transfers aimed at encouraging better attendance at primary schools.
  - Increase spending on public education that benefits the poor to build human capital and make educational opportunities less dependent on socioeconomic circumstances.
- Broad focus for education policies:
  - Help students achieve strong academic outcomes.
  - Encourage continuation to higher levels of education.
  - Ensure acquisition of skills needed to succeed in a globally competitive economy.
  - Foster greater intergenerational earnings mobility and help reduce income inequality over time.

*IMF Blog: "Why Education Policies Matter for Equality", Era Dabla-Norris, September 8, 2014*

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_Source: https://www.imf.org/en/blogs/articles/2014/09/08/why-education-policies-matter-for-equality_