DOI: 10.36347/sjebm.2015.v02i10.008

Pages: 1021-1031

Using panel data for 15 major states of India for the period 1983 to 2012, this paper empirically examines whether more funding on school education (both elementary and secondary levels) by various state governments and central government taken together can affect the distribution of income/expenditure in rural sector of India. From the findings it is observed that public expenditure on school education helps reducing income inequality whether we use the rightist view of inequality or relative inequality as measured by Gini coefficient or, the leftist view of inequality or absolute inequality as measured by either absolute Gini or by Standard Deviation of income in rural sector of India. These findings are robust to the inclusion of various socio-economic and demographic variables. The findings, therefore, suggest that devoting more public expenditure on school education may be one way to reduce income inequality in India. We have also tried to explain the nature of variation in all the variables, viz, the dependent variable (income inequality as measured by three methods) and all explanatory variables (as mentioned in section IV) across 15 major states of India and over the time period from 1983 to 2012. In our results we see that the inter-state variation is more significant than inter-temporal variation for all explanatory variables and explained variable except school education expenditure. For school education expenditure the inter-temporal variation is more significant than inter-state variation.