How Can Education Policy Improve Income Distribution?: An Empirical Analysis of Education Stages and Measures on Income Inequality

Abstract

This paper examines the individual effects of primary, secondary and higher education on income distribution, using different measures of investment rates in education: enrollment rates, public expenditures and public expenditures per student, in each education stage. The panel data method is utilized in estimating the effects of different stages and measures of investment rates in education on income inequality across countries and among sample splits for developed and less developed countries since 1960. The results reveal that expenditures per student in primary education highly significantly improve income distribution especially globally and for less developed countries. Moreover, secondary education, for enrollment rates, and public expenditures particularly among already developed countries, has statistically significant equalizing effects. These results imply that education policy would improve income distribution by ensuring that expenditures per student in primary school are kept up with increases in student cohorts, and by promoting enrollment in secondary education.