Trends in Cyprus Wage Inequality : The Returns to Education

Education is widely recognized as one of the most important determinants of earnings in the labour market. A main aspect of the relationship between education and earnings is the wage premium between workers with higher and lower education. The findings of previous studies show that changes in the relative supply of high skilled to low skilled workers are negatively related with the wage premiums. Increases in relative demand, on the other hand, are found to have a positive impact. In this study I analyze the evolution of wage premiums of attaining further education in the Republic of Cyprus. The results indicate a fall, on average, in the wage premiums of the first period (1991-1996) and a rise in the second (1996-2003). Several plausible explanations are given for these changes using the findings, the existing literature and important historical facts