Educational upgrading and returns to skills in Latin America: evidence from a supply– demand framework Pablo Acosta 4 , Guillermo Cruces 1,2 , Sebastian Galiani 3* and Leonardo Gasparini 1 1 Introduction Income inequality dynamics in Latin America, one of the most unequal regions in the world, have been far from stable. While income dispersion significantly increased over the 1990s in most Latin American countries, the decade of 2000 was marked by a wide- spread fall in socioeconomic and labor disparities (López-Calva and Lustig 2010; Gas- parini et al. 2011). 1 Recent data for the 2010s suggest a slowing down of the pace of that fall and even indicate signs of stagnation and reversion in some economies (Gasparini et al. 2016). Understanding the drivers of these changing patterns is a difficult task, plagued by all sorts of methodological and data problems. In this paper, we contribute to that aim by providing evidence on patterns of wage skill premiums and labor sup- ply by educational categories, exploiting a large database of microdata from harmonized national household surveys. Looking at wage premiums is important as the main source of inequality in household incomes (at least in the household incomes captured by sur- veys) is dispersion in earnings. e analysis is based on a simple but illustrative supply and demand equilibrium framework that has been applied successfully to the study of returns to labor market Abstract This paper documents the evolution of wage differentials and the supply of workers by educational level for sixteen Latin American countries over the period 1991–2013. We find a pattern of rather constant rise in the relative supply of skilled and semi-skilled workers over the period. Whereas the returns to secondary education fell over time, in contrast, the returns to tertiary education display a remarkable changing pattern com- mon to almost all economies: significant increase in the 1990s, strong fall in the 2000s, and a deceleration of that fall in the 2010s. We conclude that supply-side factors seem to have limited explanatory power relative to demand-side factors in accounting for changes in the wage gap between workers with tertiary education and the rest. Keywords: Returns to skills, Latin America, Inequality, Education JEL Classification: J01 Open Access © The Author(s) 2019. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. RESEARCH ARTICLE Acosta et al. Lat Am Econ Rev (2019) 28:18 https://doi.org/10.1186/s40503-019-0080-6 Latin American Economic Review *Correspondence: galiani@econ.umd.edu 3 University of Maryland, College Park, USA Full list of author information is available at the end of the article 1 Whereas patterns have been similar in most of the developing world, the size of the changes was significantly larger in Latin America (Alvaredo and Gasparini 2015).