In Latin American countries: the expansion of education has been very significant in the last decades; however, the level of inequality has not been reduced. This paper considers the question: Is education an equalizing system? One of the main mechanisms for the transformation of widespread education into higher salaries and into reduced inequality is the labour market. In this sense, the search for an explanation of the paradox should, in the first place, focus on the functioning of the labour market. Section 1 presents a model of the theory of labour markets in the sigma society. The process of human capital accumulation is developed in Section 2. The relations between education and income are analyzed in Section 3. The empirical predictions of the theoretical model are presented in Section 4. These are the hypotheses that will be tested empirically for the Peruvian case. Section 5 provides a critical analysis of the database to be used in the testing process. The falsification of the hypotheses is shown in section 6. The final section presents the conclusions of the falsification process and also some of its consequences for the design of policies. The article has a Statistical Appendix, which shows the results of the statistical tests. This paper was presented at 'Conflict Prevention and Peaceful Development: Policies to Reduce Inequality and Exclusion', a CRISE policy conference held on July 9-10, 2007 at Queen Elizabeth House, Oxford.
Education, labour markets and inequality in Peru.