On the origins of inequality in Chile

Available from: 
October 2013
Paper author(s): 
Sergio Urzúa (University of Maryland)
Jorge Rodriguez (University of Chicago)
Dante Contreras (University of Chile)
Topic: 
Education - Health
Labor
Poverty - Inequality - Aid Effectiveness
Year: 
2013

This paper explores the role of early human capital endowments and the schooling system as determinants of labor market outcomes in Chile. We pay particular attention to income inequality. Using reduced-form models we investigate how individual- and school-level variables shape the dispersion in labor income. Our empirical strategy uses unique longitudinal data on individual-level test scores during high school, school and family characteristics, as well as adult earnings. We show that the school types (public, private-voucher or private-fee-paying schools) are important sources of earnings heterogeneity. Specifically, private-fee-paying schools have a greater return on earnings than voucher and public schools. Moreover, an increase in academic achievement has a larger impact on earnings if a student attends a private-fee-paying school or a high achievement school. We also document the relative importance of two educational public policies on inequality. A teacher incentive program providing monetary rewards to high-achieving schools in a tournament framework and a program lengthening the school day. Both policies have positive effects, but only for ablest students in private schools. Finally, we show that educational (public and private) investment at age 16 has greater effects on earnings for students in private-fee-paying schools.

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Research section: 
Lacea 2013 annual meeting
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