Mind the gap : Irrevocable wage differentials in Chile

Abstract

Using a longitudinal database that follows individuals from their last years of schooling to their first years at labor market we apply a decomposition methodology in order to understand the wage differentials among school types in Chile. With micro-simulations exercises we can isolate the impact on wages of changes in the academic achievements of individuals and changes in their associated returns in labor market. Our results show that even when adding one extra standard deviation to the test score achieved by the most vulnerable individuals at high school, there is a considerable difference in the endowments returns between groups that makes almost impossible to close the existent wage gap between them at labor market. In this way, as long as the prices of the academic achievement in the labor market remain constant, no public policy or major investment e orts will succeed in eliminating the wage differentials between school types.