The labor market effects of an educational expansion

Abstract

This paper studies the labor market effects of an educational expansion on the occupational structure of employment and the wage distribution in Brazil. I document that, along with a large educational expansion between 1995 and 2014, the occupational structure of employment remained surprisingly fixed, with workers of all educational groups increasingly employed in lower wage occupations. Despite this common occupational downgrading, wages of primary educated workers soared while wages of workers with secondary school and university declined, bringing forth reductions in poverty and inequality. I then show that a relatively simple task-based model can trace all these heterogeneous patterns to the educational expansion. Specifically, I find that increases in education explain around 60% of the observed changes in occupations and wages. I also find that further educational expansions have marked diminishing returns due to more educated workers being increasingly employed in occupations where schooling adds little value to workers’ productivity.