Comparison of Approaches to Measuring the Causes of Income Inequality
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Most of the inequality literature in the United States and developing countries has focused on education and fringe benefit provided by government as determinants of income inequality. The partial effect (sign, magnitude, and significance) of education on the measure of income inequality depends not only on the return to education but also position of unit of observation on the upper and lower tail of income distribution. In the recent development literature, it has been pointed out that there exists the endogeneity issue regarding the causality of income inequality and education attainment. Hence, the estimating results of partial effect might be inconsistent. Taking advantages of the newly developed quantile regression with control function, this study compares the result from conventional estimation to the results of this new estimation method.