Access to Power and Inequality

Stumbling and mumbling, via nc links:

One might try and rescue the marginal productivity story by arguing that the return to primary education is low and that to university education has risen because of skill-biased technical change, so that a rise in human capital equality because of higher basic skills is compatible with rising inequalities of marginal productivity. However, other research suggests this story isn't true; the returns to basic skills are quite high, and changes in inequality are loosely linked to changes in education.

Instead, the more obvious possible reason for the lack of link between human capital and income equality is simply that inequality reflects not differences in productivity but differences in power which themselves arise from institutional differences.Inequality is higher in south America than in Japan or South Korea simply because south America has extractive institutions which enable a small minority to exploit the masses, whereas Japan and South Korea do not.

Institutional differences in power also help explain another fact: why does the return to university education differ so much (pdf) across European nations of similar income? It is higher in the UK than in Germany or Nordic countries, for example. It's hard to explain this by technical change or globalization, as these factors should have affected countries reasonably similarly. A more plausible possibility, surely, is that institutional factors - the power of capital over labour - allow (some) graduates greater access to the economic surplus in the UK than it allows them in the Nordic countries.

This makes a good deal of sense.  It also points to how legacy students at elite universities end up better off than smarter students at less elite colleges.