Does education become a key to explain income inequality?

• Main Authors: Chew, Phei-Vern, Lim, Teik Wei, Low, Yew Chong, Tang, Sean Wei, Yeoh, Zi Yan
• Format: Final Year Project / Dissertation / Thesis
• Published: 2019
• Subjects: HG Finance
• Online Access: http://eprints.utar.edu.my/3559/1/fyp_BF_2019_CP.pdf; http://eprints.utar.edu.my/3559/
• Institution: Universiti Tunku Abdul Rahman

Income inequality has always been an important issue all over the world. It is an unequal percentage of the income held by the populations, that there was a small group of people was taking over control on a large amount of the country’s income. Developing countries and developed countries is studied in this paper, control variables such as financial development, economic growth, trade openness and technological changes were used to study the impact of education on income inequality in 34 developed countries from year 1971 to 2015 and 51 developing countries from year 2003 to 2015 respectively. Generalized Method of Moments (GMM) dynamic panel estimators is applied into this paper to conduct the research. There are two GMM dynamic panel estimators, which is “difference GMM” and “system GMM”, and “system GMM” is found more liable then “difference GMM”. This study will emphasize on the relationship between secondary education and income inequality in both developing and developed countries by using GMM estimator. In overall, the results show that education, financial development, economic growth, trade openness and technological changes are found affect income inequality. Variables that having positive relationship with income inequality are education, economic growth and trade openness, for developed countries. Whereas financial development and technological changes have a negative correlation with the income inequality. Under developing countries, education and income inequality are in a positive relationship. While financial development, economic growth, trade openness and technological changes have an adverse relationship on income inequality.