A decomposition method to evaluate the ‘paradox of progress’ with evidence for Argentina

Produced by: 
Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS)
Available from: 
December 2021
Paper author(s): 
Javier Alejo
Leonardo Gasparini
Gabriel Montes-Rojas
Walter Sosa-Escudero
Poverty - Inequality - Aid Effectiveness

The ‘paradox of progress’ is an empirical regularity that associates more education with larger income inequality. Two driving and competing factors behind this phenomenon are the convexity of the ‘Mincer equation’ (that links wages and education) and the heterogeneity in its returns, as captured by quantile regressions. We propose a joint least-squares and quantile regression statistical framework to derive a decomposition in order to evaluate the relative contribution of each explanation. The estimators are based on the ‘functional derivative’ approach. We apply the proposed decomposition strategy to the case of Argentina 1992 to 2015.


Research section: 
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