What Changes Gini Coefficients of Education? On the dynamic interaction between education, its distribution and growth

We are interested in the relation between Gini coefficients of education, educational variables, and growth. We specify a system of 14 difference equations with lagged dependent variables in education variables, as well as a growth regression, auxiliary equations for savings and investment ratios, and the growth of the labour force and estimate all of them simultaneously. Having a closed system of 18 equations we run simulations, which show that for the panel average enrolment in tertiary education will go beyond 90%, and therefore drive transitional growth rates and average years of schooling to high levels and reduce inequality over time. This will be achieved by reductions in gender gaps, higher enrolment rates, and lower dropout rates, lower pupil-teacher ratios and higher public expenditure on education. There are no simple one-way causalities. Policies enhancing savings ratios and enrolment in tertiary education have the largest effects through the whole system.