Global Inequality in a more educated world
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Global Inequality in a more educated world Amer Ahmed 1 & Maurizio Bussolo 1 & Marcio Cruz 1,2 & Delfin S. Go 1 & Israel Osorio-Rodarte 1 Received: 2 July 2018 / Accepted: 24 March 2020/ # World Bank 2020
Abstract
Better-educated and younger cohorts from developing countries are entering the global labor market. This education wave is altering the skill and geographic composition of the global labor market, and impacting income distribution, at the national and global levels. This paper analyzes how this education wave reshapes global inequality over the long run using a general-equilibrium macro-micro simulation framework that covers harmonized household surveys for almost 90% of the world population. The findings suggest that global income inequality will likely decrease by 2030. The expanding supply of better educated workers from developing countries will be a key factor, especially in supporting the reduction of income disparities between countries. The education wave will also minimize, mainly for developing countries, increases of within-country inequality linked to technological progress and its widening of wage premia. JEL Classification D31 . J11 . J31 . E24 Keywords Global inequality . Education . Demographic trends . Structural change Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10888-02009440-z) contains supplementary material, which is available to authorized users.
* Maurizio Bussolo [email protected] Amer Ahmed [email protected] Marcio Cruz [email protected] Delfin S. Go [email protected] Israel Osorio-Rodarte [email protected]
1
World Bank Group, Washington, DC 20433, USA
2
Federal University of Paraná, Rua XV de Novembro, 1299, Curitiba 80060-000, Brazil
A. Ahmed et al.
1 Introduction In the next two decades, younger and better-educated cohorts are projected to contribute to the expansion of the global workforce, while older, less educated ones leave. This skill-biased expansion will also be geographically biased, as it will be composed almost exclusively of workers from developing countries. This paper estimates the size of this structural shift and shows how it could reduce global inequality by a magnitude close to that observed in the last two decades or so. Lakner and Milanovic (2016) estimate that global inequality, as measured by the Gini index,1 dropped about 2 Gini points from 72.2 in 1988 to 70.5 in 2008. Strong economic expansion of developing countries, including the sustained growth of China and India, boosted convergence of per-capita incomes at the global level.2 And this convergence drove the reduction of global inequality, even if technological change and aging contributed to increasing inequality at the national level in many countries. Since the fall of the Berlin Wall, a crucial factor shaping global inequality has been the rapid integration of rising working-age populations in developing countries into the world economy. In the words of Freeman (2008 and 2007), a truly global labor market to
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