Public Education Spending and Income Inequality

Abstract

This paper investigates the relationship between public education spending and income inequality across U.S. counties from 2010 to 2022 using quantile regression methods. The analysis shows that total per pupil education spending is consistently associated with a small increase in income inequality, with stronger effects in high inequality counties. In contrast, the composition of education spending plays a substantially more important role. Reallocating budgets toward instructional, support service, and other current expenditures significantly reduces income inequality, particularly at the upper quantiles of the Gini distribution. Capital outlays and interest payments exhibit weaker and mixed effects. Economic and demographic factors, especially poverty, median income, and educational attainment, remain dominant drivers of inequality. Overall, the results demonstrate that how education funds are allocated matters more than how much is spent, underscoring the importance of budget composition in using public education policy to promote equity.