Local government expenditure on education and its effect on income inequality at the county level in Chile

Main Article Content

Felipe M. Gutiérrez-Garrido
Andrés A. Acuña-Duarte http://orcid.org/0000-0002-1623-4616

Keywords

income inequality, education expenditure, fractional response, Tobit

Abstract

In this paper we analyze the effect of per-capita education expenditure on the distribution of autonomous income among Chilean counties, where income inequality is measured through Gini and Theil indices, and the S80/S20 and S90/S10 ratios. The longitudinal study considers 307 Chilean counties in order to estimate a fractional response Probit model for Gini index and random-effects Tobit models for the remaining indicators of inequality. Main findings indicate that an increasing per-capita education expenditure would reduce the income inequality among Chilean counties. Moreover, the estimates show that the above negative effect is not immediate but it would take from 3 to 5 years in reducing income inequality at the county level. Finally, the evidence suggests that indigenous people in Chile would be exposed to a larger income inequality when the latter is quantified by Theil index.

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