Association for Public Policy Analysis & Management

One of the most important economic trends of the past 30 years has been the escalating levels of within-country income inequality (Piketty 2014; Keeley 2015; T. M. Smeeding 2005; OECD 2011; A. B. Atkinson 2015; Piketty 2015; Anthony B. Atkinson, Piketty, and Saez 2011; Gottschalk and Smeeding 1997). The United States and the United Kingdom have experienced the sharpest increases in economic disparities within the OECD (Kathryn M. Neckerman and Florencia Torche 2007; Topel 1997). Indeed, income inequality in the United States now exceeds the previous highs of the 1930s (Piketty and Saez 2014). Other areas of Europe have also suffered from increases in income inequality, although generally to a lesser extent (Kierzenkowski and Koske 2013).

Recent research has found that increases in income inequality can produce a wide variety of societal ills, including rising homicide rates (Kennedy, Silverman, and Forde 1991; Wilkinson and Pickett 2007), increases in violence (Wilkinson and Pickett 2010), including political violence (Gurr 1970), lower tolerance towards minority groups such as homosexuals (Andersen and Fetner 2008), higher rates of incarceration (Wilkinson and Pickett 2007), and more generally, a loss of social cohesion (Stiglitz 2015; Mayer 2001). Inequality may also decrease social capital, depress an individual's learning productivity, discourage investments in human capital (Josten 2004), discourage workers at the lower end of the economic spectrum (Ku and Salmon 2012), slow the rate of economic growth (Ostry, Berg, and Tsangarides 2014), and increase the likelihood of financial crises (Kulikauskas 2013).

This paper examines the effects of economic inequality on educational outcomes. Drawing upon data provided by the World Bank and the OECD, we find that economic inequality has large, negative, statistically significant effects on student academic achievement. In our examination of the effects of inequality on reading, math, and science PISA scores taken between 2000 and 2015, we find that countries with higher levels of economic inequality experienced lower average student performance on these tests. The effect sizes are large. Economic inequality has larger effects on student performance on these tests than does a country’s GDP per capita, level of educational spending, and aggregate pupil-teacher ratios.