An Empirical Analysis of Income Inequality, Education Expenditures, and Growth

Abstract

Why does income inequality lower economic growth as reported in Clarke (1995)? This paper considers public education expenditures as a potential link from income inequality to economic growth. I find that countries with a higher degree of income inequality devote more resources to public education. Although the effect of past education expenditures upon growth is positive, the contemporaneous effect upon growth is negative. With a large cost ofsupporting apublic education system; these findings may explain the lack of a large, positive effect from the growth of human capital upon economic growth as reported in the empirical literature. (04, 02)