Educational Policies and Income Inequality

In this paper we study the associations between educational policies, distributions of educational attainments and income distributions. By matching inequality measures on test scores, years of education and labour earnings by country, birth cohorts and gender, we show that inequality in education (measured both at quality and quantity levels) affect earnings inequality. We then consider potential endogeneity of educational distributions and we resort to instrumental estimation using information on government reforming activity in the field of education. By controlling for country-specific and time fixed effects, and by separating age and cohorts effects, we prove that educational inequality respond to educational reforms, identifying educational policies (like later entry into compulsory education or introduction of standardised tests) capable to reduce income inequalities thirty years later.