Public Policy, Higher Education, and Income Inequality in the U.S.: Have We Reached Diminishing Returns

Social Philosophy and Policy 31(2): 252-280, 2015

33 Pages Posted: 17 Jun 2014 Last revised: 19 Jun 2015

See all articles by Daniel L. Bennett

Daniel L. Bennett

Baylor University

Richard K. Vedder

Ohio University - Department of Economics

Date Written: June 16, 2014

Abstract

Public policy designed to promote greater college enrollment rates has often been justified as a means to reduce income inequalities, yet there is very little evidence that higher college attainment is associated with less inequality. Economic theory at best suggests that the relationship between college attainment and inequality is ambiguous. An overview of some of the unintended consequences of public policies designed to promote greater enrollment is described. One such consequence is that the growth in college completion, which is at least partially attributable to public policy, may have actually contributed to rising income inequality. We hypothesize the existence of a U-shaped relationship between college attainment and income inequality, and using panel data for the 50 U.S. states over the period 1970-2004 provide empirical evidence in support of the curve. Prior to the mid 1990’s, increases in attainment were associated with less inequality for most states. Rapid growth in attainment since then has moved most states to the right of the inflection point such that attainment gains are associated with more inequality in most states.

Keywords: Income Inequality, Higher Education, Public Policy

JEL Classification: D31, I240, J31

Suggested Citation

Bennett, Daniel and Vedder, Richard K., Public Policy, Higher Education, and Income Inequality in the U.S.: Have We Reached Diminishing Returns (June 16, 2014). Social Philosophy and Policy 31(2): 252-280, 2015, Available at SSRN: https://ssrn.com/abstract=2451152

Daniel Bennett (Contact Author)

Baylor University ( email )

Waco, TX 76706
United States

HOME PAGE: http://www.BennettEcon.com

Richard K. Vedder

Ohio University - Department of Economics ( email )

Athens, OH 45701-2979
United States
740-593-0142 (Phone)
740-593-0097 (Fax)

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