Labour Market Returns and Wage Inequality: New Evidence for Europe

Abstract

We study the relationship between returns to education and the wage distribution in Europe and we find evidence for a new fact: A hump-shaped relationship between returns and the wage distribution. This hump-shaped relationship between returns to education and the wage distribution means that investments on education contributes to increase inequality between the lower bound of the wage distribution and the median (roughly) but for the richer part of the wage distribution, education tends to decrease wage inequality. There is also evidence of a non-monotonous relationship between returns to tenure and gender, on one side, and the wage distribution, on the other side.