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Labor Economics Workshop - David Jaume

Mon, 09/18/2017 - 11:40am

David Jaume

Cornell University, Ph.D. Candidate

115 Ives Hall

"The Labor Market Effects of an Educational Expansion: The case of Brazil from 1995 to 2014"

Although most developing countries are experiencing increases in the educational attainment of their workforce, the general equilibrium effects of these educational expansions are usually overlooked. This paper studies the effects of increases in education on the occupational structure of employment and on the wage distribution. I use an assignment model of workers with three levels of education -low, medium, and high- to an infinite number of occupations to investigate three different cases: an increase in the share of workers with medium education, an increase in the share of workers with high education, and a simultaneous increase in both. I find that under any educational expansion there is occupational downgrading for low educated workers (the level of complexity of the occupations where they are employed declines), the occupational composition of employment is relatively rigid compared to educational changes, and wages decline for at least one educational group. I also find that an increase in high education unambiguously rises wages of low educated workers but this may not be the case for an expansion in medium education. My analysis further shows that in general there is no welfare improvement characterized by a first order dominance in the wage distribution, but a first order dominance may arise when the educational expansion is large and involves both medium and high education. I apply this framework to Brazil, a country that underwent a rapid educational expansion of its workforce between 1995 and 2014 together with minor changes in the occupational structure, occupational downgrading for all workers' type, heterogeneous changes in their wages, and increases in welfare coupled with inequality reductions. Through the lens of the model, the educational expansion was the main driver of these observed patterns. By running counterfactuals, I find that wage gains due to successive educational expansions declined rapidly in Brazil.

Event Categories: Labor Economics