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The Economic Costs of Educational Inequality in Developing Countries

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Inequality, economic costs, Oaxaca-Blinder decomposition
This paper demonstrates that education can be an effective policy instrument to mitigate economic inequality among marginalized gender and identity groups in developing countries. We characterize the disparities in economic opportunity between gender, identity (ethnic or religious), and gender-by-identity groups in relation to disparities in educational attainment. We employ a Oaxaca-Blinder decomposition to determine the extent to which these gaps are attributable to education inequality. The analysis covers 18 countries from Eastern Europe, Latin America, and Sub Saharan Africa. We show that about half of the identity group disparities are explained by gaps in education and only about 15-17 percent of the gender employment and wage gap. However, on aggregate, eliminating identity group and gender education disparities, relative to the most advantaged, yield substantial increases in the total number of salaried workers and in the total wage bill.
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