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Public Education Spending and Income Inequality

Ishmael Amartey

TL;DR

This paper addresses whether public education funding reduces income inequality and how allocation matters. It uses county-level panel data from $2010$–$2022$ and four quantile regression models to map effects across the $Gini$ distribution, considering total expenditures, component expenditures, and budget shares. The results show that while total per-pupil spending has a small, positive association with inequality, allocation matters more: reallocating funds toward instructional, support services, and other current spending reduces inequality, especially at higher quantiles, whereas capital and interest outlays have weaker or mixed effects; demographic and economic controls like poverty and median income dominate overall. The findings imply policy should emphasize budget composition to promote equity, with modest reallocations yielding meaningful reductions in inequality in counties with large gaps, all within broader socioeconomic contexts.

Abstract

This paper investigates the relationship between public education spending and income inequality across U.S. counties from 2010 to 2022 using quantile regression methods. The analysis shows that total per pupil education spending is consistently associated with a small increase in income inequality, with stronger effects in high inequality counties. In contrast, the composition of education spending plays a substantially more important role. Reallocating budgets toward instructional, support service, and other current expenditures significantly reduces income inequality, particularly at the upper quantiles of the Gini distribution. Capital outlays and interest payments exhibit weaker and mixed effects. Economic and demographic factors, especially poverty, median income, and educational attainment, remain dominant drivers of inequality. Overall, the results demonstrate that how education funds are allocated matters more than how much is spent, underscoring the importance of budget composition in using public education policy to promote equity.

Public Education Spending and Income Inequality

TL;DR

This paper addresses whether public education funding reduces income inequality and how allocation matters. It uses county-level panel data from – and four quantile regression models to map effects across the distribution, considering total expenditures, component expenditures, and budget shares. The results show that while total per-pupil spending has a small, positive association with inequality, allocation matters more: reallocating funds toward instructional, support services, and other current spending reduces inequality, especially at higher quantiles, whereas capital and interest outlays have weaker or mixed effects; demographic and economic controls like poverty and median income dominate overall. The findings imply policy should emphasize budget composition to promote equity, with modest reallocations yielding meaningful reductions in inequality in counties with large gaps, all within broader socioeconomic contexts.

Abstract

This paper investigates the relationship between public education spending and income inequality across U.S. counties from 2010 to 2022 using quantile regression methods. The analysis shows that total per pupil education spending is consistently associated with a small increase in income inequality, with stronger effects in high inequality counties. In contrast, the composition of education spending plays a substantially more important role. Reallocating budgets toward instructional, support service, and other current expenditures significantly reduces income inequality, particularly at the upper quantiles of the Gini distribution. Capital outlays and interest payments exhibit weaker and mixed effects. Economic and demographic factors, especially poverty, median income, and educational attainment, remain dominant drivers of inequality. Overall, the results demonstrate that how education funds are allocated matters more than how much is spent, underscoring the importance of budget composition in using public education policy to promote equity.
Paper Structure (10 sections, 2 equations, 5 figures, 6 tables)

This paper contains 10 sections, 2 equations, 5 figures, 6 tables.

Table of Contents

  1. Introduction
  2. Literature Review
  3. Methodology
  4. Econometric Models
  5. Quantile Regression Specification
  6. Methodological Considerations
  7. Why Education Impact Income Distribution
  8. Data Sources and Variable Construction
  9. Results
  10. Conclusions

Figures (5)

  • Figure 1: Trends in Per-Pupil Total Spending (2010-2022)
  • Figure 2: Quantile Regression plot for model 1
  • Figure 3: Quantile Regression plot for model 2
  • Figure 4: Quantile Regression plot for model 3
  • Figure 5: Quantile Regression plot for model 4