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Education and Income Inequality: Brazil as a Case Study

Erick Marin erick.marin@american.edu American University School of International Service Comparative and Regional Studies. Education and Income Inequality: Brazil as a Case Study. Research Question & Hypothesis. Research Question:

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Education and Income Inequality: Brazil as a Case Study

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  1. Erick Marin erick.marin@american.edu American University School of International Service Comparative and Regional Studies Education and Income Inequality: Brazil as a Case Study

  2. Research Question & Hypothesis • Research Question: • Do people with higher education levels receive higher incomes? To answer this research question, this study will look at the variables of income groups, educational levels attained, profession, age and gender. A focus will be on the returns on education from human capital investment. • Research hypothesis: • Controlling for age, gender, profession and wave (time period) I predict that there will be a positive association between income levels and levels of education.

  3. Background Info & Lit. Review • Theory and Findings from paper #1 • Blundell et. al–Human Capital Investment: The Returns from Education and Training to the Individual, the Firm and the Economy • Theory: Education confers significant wage advantages to individuals. • Findings : The available evidence has shown that human capital is an important factor in individual, firm and national economic growth. In particular, positive economic returns to education at the individual level have been consistently found • Theory and Findings from paper #2 • Theory: Francisco Ferreira and Ricardo de Barros –Education and income distribution in urban Brazil, 1976-1996 • Research: What is causing growth in mean incomes on the one hand yet rise in extreme poverty on the other and what forces cause the occupational choices from educational attainment that create an observed inequality decline along with the rise in poverty. • Findings: extreme poverty has increased, which seems to have been caused by outcomes related to participation decisions and occupational choices, in combination with declines in the labor market and returns to education and experience. These changes are associated with greater unemployment and informality, as one would expect, but more research into them seems necessary

  4. Data • Unit of analysis/study : Individual • Source of the data: World Values Survey • Reliability of the data: • Income variable is subjective – no specific amounts • Many participants failed to answer important variables, leading to missing data • Dependent variable: • Income Level • Unit of Measurement = Individual • LOM = Ordinal

  5. Data II: • Independent Variables: • Highest Education Level Attained; Unit = Individual; LOM = Ordinal • Profession; Unit = Individual; LOM = Ordinal • Age; Unit = Individual; LOM = Ordinal • Gender; Unit = Individual; LOM = Nominal

  6. Descriptive Statistics • Dependent Variable is the income level of Brazilians • Unit = Individual • LOM = Ordinal • Range = 1-10 • 1 = Lowest Income Group • 10 = Highest Income Group • Mean = 3.545806 • Mode = 1 • Std. Dev. = 2.24464 • 2587 Observations

  7. Descriptive Statistics II

  8. Bivariate Analysis Bold text indicates statistical significance

  9. Regression AnalysisDependent variable is Income Level 1= Lowest Group; 10 = Highest Group , Bold text indicates statistical significance

  10. Findings & Policy Implications • Did you accept your research hypothesis? • There is a positive correlation between levels of education and income. • Job sophistication appears to be positively correlated with income • But an unexpected finding is the perceived difference in the effects of gender and age on income in Pre-Lula and Lula Eras. Although we cannot make the claim that this was caused necessarily because of policies within the Lula administration, since various others factors could come into play, the analysis does find that overall younger males are in higher income groups during the Lula era. More research is necessary into what is causing these outcomes. • What are the policy implications of your findings? • In order to reduce the income inequality gap in Brazil, the new administration needs to place a strong emphasis on raising educational attainment and reducing discrimination in the workplace. The new Dilma administration needs to implement policies that focus on reversing whatever is affecting the income of an individual due to their gender and age.

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