drives up their wages.

 

Workers in both categories therefore benefit from schooling—and low-skilled

workers in the traditional sector may even benefit more. These effects are

enormous and play a key role in shaping the distribution of economic gains from

education.

 

They should be at the center of any debate on the role of education in improving

economic efficiency and equity.

 

This phenomenon highlights another important point. The aggregate and

distributional effects of education depend on the evolution of employers’ demand

for skilled labor. In recent decades, large technological advances

disproportionately benefited highly skilled workers. Such skill-based

technological change was a major driver of rising inequality in the United

States, where college attendance did not expand fast enough to keep up with

growing demand for skilled workers.

 

This interaction between education and technology has played an important role

in generating income gains for poor people worldwide. Without technological

progress, education would have had significantly lower effects on economic

growth. At the same time, without educational expansion, technological change

would have generated little growth, and this growth would have benefited a much

narrower set of skilled workers, especially in low-income countries. In a world

with growing interdependence between skills and technology, education and