Persistent Misallocation and the Returns to Education in Mexico

Levy, Santiago ; Lopez-Calva, Luis Felipe

World Bank, Washington, DC

关键词: RETURNS TO EDUCATION;    EARNINGS INEQUALITY;    MISALLOCATION;    WAGE INEQUALITY;    RESOURCE ALLOCATION;   

DOI  :  10.1596/1813-9450-8690
RP-ID  :  WPS8690

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Over the last two decades, Mexico hasexperienced macroeconomic stability, an open trade regime,and substantial progress in education. Yet averageworkers' earnings have stagnated, and earnings of thosewith higher schooling have fallen, compressing the earningsdistribution and lowering the returns to education. Thispaper argues that distortions that misallocate resourcestoward less-productive firms explain these phenomena,because these firms are less intensive in well-educatedworkers compared with more-productive ones. It shows thatwhile the relative supply of workers with more years ofschooling has increased, misallocation of resources towardless productive firms has persisted. These two trends havegenerated a widening mismatch between the supply of, and thedemand for, educated workers. The paper breaks down workerearnings into observable and unobservable firm andindividual worker characteristics, and computes acounterfactual earnings distribution in the absence ofmisallocation. The main finding is that in the absence ofmisallocation average earnings would be higher, and thatearnings differentials across schooling levels would widen,raising the returns to education. A no-misallocation path isconstructed for the wage premium. Depending on parametervalues, this path is found to be rising or constant, incontrast to the observed downward path. The paper concludesarguing that the persistence of misallocation impedes Mexicofrom taking full advantage of its investments in theeducation of its workforce.