Patterns and sources of changing wage inequality in Chile and Costa Rica during structural adjustment

During their respective periods of structural adjustment, inequality increased more rapidly in Chile than in Costa Rica. Using a new technique which measures the effects of changes in the quantities and prices of individual dimension of human capital on overall wage inequality, we identify changes in wage premiums associated with more education as an important cause of the different inequality outcomes. We present evidence that the different education price effects were due to different rates of growth in the demand for more-educated workers. Furthermore, inequality increased in Chile despite a large equalizing education quantity effect. (C) 2001 Elsevier Science Ltd. All rights reserved.