Expansion in Education and Its Impact on Income Inequality: Cross-sectional Evidence from India

Generally, inequalities of any kind are undesirable and the often mentioned income inequality in particular is a manifestation of inequality in other capability domains. Given the adverse implication of income inequality upon the economic and political environments, many would agree that having a less skewed distribution of income is preferable to a highly unequal one. Among various capabilities, education is seen as a potentially powerful income equalizer. The policy of equal access to education is supported, when there is an interest in equalizing income distribution. In this background, the present paper makes an attempt to examine the association between educational expansion and income distribution using cross-sectional data from India. This exercise is carried out independently for rural and urban sector. During the course of analysis, an attempt is made to examine the relationship between the mean and inequality in per capita income. The empirical results confirm the U-shaped relation between the mean and inequality in per capita income for rural sector. But for urban sector, it is found to be linear and positive. The analysis did not find any significant association between the levels of schooling and income inequality in rural sector. However, in urban sector, income inequality is found to be positively related to the share of graduates in the work force.