The puzzling evolution of income inequality

There is good evidence now that income inequality is decreasing in some countries at an unprecedented pace. Income is the outcome of a series of factors, including human capital. So, what is happening with the human capital inequality? And what about countries?

Amparo Castelló-Climent and Rafael Doménech use the latest update of the Barro and Lee dataset on human capital to figure this out. They find that overall, income inequality has not changed in sixty years, but human capital inequality has significantly decreased. This has come through important improvements at the bottom of the distribution. The authors conclude that improvements in literacy are not sufficient to reduce income inequality. I would say that this is even worse. Indeed, the Barro and Lee dataset only counts years of education. But we know that the marginal contribution of an additional year of education decreases over an individual's schooling career. Thus improvements in literacy in developing countries should have had even better results in terms of income. At the aggregate level, the authors show the opposite, though. Puzzling.