Distributional Growth Accounting: Education and the Reduction of Global Poverty

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This article quantifies the role played by education in the decline of global poverty. Drawing on a model of education and the wage structure, I propose tools for “distributional growth accounting,” isolating the contribution of schooling to economic growth by income group. I bring this framework to the data by exploiting a new microdatabase representative of nearly all of the world’s population, new estimates of the private returns to schooling, and historical income distribution statistics. Under conservative assumptions, education accounts for 50% of global economic growth, 70% of income gains among the world’s poorest 20% individuals, and 40% of extreme poverty reduction since 1980. It also explains over 50% of improvements in the share of labor income accruing to women. Combining indirect investment benefits from education with measures of direct government redistribution brings the contribution of public policies to extreme poverty reduction to at least 50%.