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Schooling, Inequality, and the Impact of Government

  • Eric A. Hanushek
  • Julie A. Somers

Analyses of income inequality have identified the importance of increased demand for worker skills, but characterizations of worker skills by the amount of schooling attained do not capture important aspects of the widening income distribution and of the stagnating relative wages of black workers. This paper is motivated by the possibility that schooling quality is an important component of the changing income distribution. The central analysis focuses on how governmental schooling policies particularly those related to the level and distribution of school spending affect the distribution of worker quality and of income. The substantial differences in spending across states are not significantly related to the variations in achievement growth across states. Further, the three decade old movement toward reducing the variation in school spending within states appears to have done nothing to reduce subsequent income variations of workers. Thus, the direct government policies toward school spending, as carried out in the past, have not ameliorated inequalities in incomes.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7450.

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Date of creation: Dec 1999
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Publication status: published as Welch, Finis (ed.) The Causes and Consequences of Increasing Inequality. Chicago: University of Chicago Press, 2001
Handle: RePEc:nbr:nberwo:7450
Note: CH LS PE
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  1. Heckman, James & Layne-Farrar, Anne & Todd, Petra, 1996. "Human Capital Pricing Equations with an Application to Estimating the Effect of Schooling Quality on Earnings," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 562-610, November.
  2. Michael Boozer & Alan Krueger & Shari Wolkon, 1992. "Race and School Quality Since Brown vs. Board of Education," Working Papers 681, Princeton University, Department of Economics, Industrial Relations Section..
  3. Smith, James P & Welch, Finis R, 1989. "Black Economic Progress after Myrdal," Journal of Economic Literature, American Economic Association, vol. 27(2), pages 519-64, June.
  4. Downes, Thomas A., 1992. "Evaluating the Impact of School Finance Reform on the Provision of Public Education: The California Case," National Tax Journal, National Tax Association, vol. 45(4), pages 405-19, December.
  5. David Card & Alan Krueger, 1990. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," NBER Working Papers 3358, National Bureau of Economic Research, Inc.
  6. O'Neill, June, 1990. "The Role of Human Capital in Earnings Differences between Black and White Men," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 25-45, Fall.
  7. Murnane, Richard J & Willett, John B & Levy, Frank, 1995. "The Growing Importance of Cognitive Skills in Wage Determination," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 251-66, May.
  8. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  9. James Heckman & Anne Layne-Farrar & Petra Todd, 1995. "Does Measured School Quality Really Matter? An Examination of the Earnings-Quality Relationship," NBER Working Papers 5274, National Bureau of Economic Research, Inc.
  10. Jeff Grogger & Eric Eide, 1995. "Changes in College Skills and the Rise in the College Wage Premium," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 280-310.
  11. Neal, Derek A & Johnson, William R, 1996. "The Role of Premarket Factors in Black-White Wage Differences," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 869-95, October.
  12. Cook, Michael D & Evans, William N, 2000. "Families or Schools? Explaining the Convergence in White and Black Academic Performance," Journal of Labor Economics, University of Chicago Press, vol. 18(4), pages 729-54, October.
  13. Eric A. Hanushek & Steven G. Rivkin & Lori L. Taylor, 1996. "Aggregation and the Estimated Effects of School Resources," NBER Working Papers 5548, National Bureau of Economic Research, Inc.
  14. Murray, Sheila E & Evans, William N & Schwab, Robert M, 1998. "Education-Finance Reform and the Distribution of Education Resources," American Economic Review, American Economic Association, vol. 88(4), pages 789-812, September.
  15. Finis Welch, 1999. "In Defense of Inequality," American Economic Review, American Economic Association, vol. 89(2), pages 1-17, May.
  16. R. M. Hauser & M. H. Huang, . "Trends in Black-White Test-Score Differentials," Institute for Research on Poverty Discussion Papers 1110-96, University of Wisconsin Institute for Research on Poverty.
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