This paper
studies education as a determinant of income for top income groups in Uruguay.
Given that these groups play a significant role in explaining inequality and that
education is one of the main drivers of it, this paper seeks to study the
extent to which educational-level income differentials explain the income gap
between the top 1 percent of the distribution and the rest of the society. The
effect of education is estimated through Mincer Equations for the mean, as well
as through Recentered Influence Regressions for different percentiles along the
distribution. Our results show that education is a key determinant in
explaining income and that educational returns are heterogeneous across the
distribution. Moreover, it is evident that the higher the level of education,
the greater the difference in returns for different income percentiles.
Additionally, we find that the association between education and income is stronger
when both labor and capital income are considered than when only labor income
is taken into account, particularly for tertiary education level or higher. A
more exhaustive analysis of the top 1% group shows that the 62% of the group
have completed tertiary education or higher, and they capture most of the
capital income of this group.