Oktober 2007

IZA DP No. 3102: “For One More Year with You”: Changes in Compulsory Schooling, Education and the Distribution of Wages in Europe

published as 'Changes in Compulsory Schooling, Education and the Distribution of Wages in Europe' in: Economic Journal, 2009, 119 (536), 516 - 539

Using data from 12 European countries and the variation across countries and over time in the changes of minimum school leaving age, we study the effects of the quantity of education on the distribution of earnings. We find that compulsory school reforms significantly affect educational attainment, especially among individuals belonging to the lowest quantiles of the distribution of ability. There is also evidence that additional education reduces conditional wage inequality, and that education and ability are substitutes in the earnings function. These results do not support an elitist public education policy - more education to the brightest - and suggest that investing in the less fortunate, either because of poor labour market fortune or because of poor talent, could pay off both on efficiency and on equity grounds.