Journal of Applied Finance & Banking

An Empirical Analysis on the Impact of Higher Education on Income Inequality

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  • Abstract 
    The study on the relationship between the higher education and income inequality is of great importance to exploring ways to reduce income inequality. With the macro-level time-series data of the United States from 1967 to 2015, this paper empirically tested the relationship between higher education and income inequality. The result indicated that there is a significant inverted-U relationship between higher education and income inequality, that is, when the higher education is not widely available, the bonus of higher education is significant, which can aggravate income inequality. When the higher education is widely available, the education expansion will narrow the income gap. At the same time, the model also verified the impact of such variables as financialization, trade union density, trade dependence, the proportion of female labor participation, and business cycle fluctuations on the evolution of income inequality in the United States. Hopefully, the result of this research can offer some helpful references for developing countries to narrow their income gap by educational expansion. 
    Keywords: Higher education, income inequality, inverted-U relationship, macrolevel time-series data of the United States.