Does Economic Inequality Matter Even when Average Incomes Are Low: An Analysis of Educational Attainment in Rural India

Ankur Sarin, University of Chicago

In the belief that the distribution of income might not matter when average income is low, developing countries have largely been ignored in the spurt of empirical analysis examining the social consequences of economic inequality. In my paper, I take a step towards redressing this gap in the research literature by examining the consequences of economic inequality on educational attainment in India. Data from the National Family Health Surveys conducted in 1992-93 and 1998-99 is used along with relevant state and village level variables. The effect of inequality is found to vary with the nature of the democratic political process and education policies are found to play a crucial mediating role. However, policy is not the only way through which inequality and polity affect educational attainment – the non-linear relationship between household wealth and education, the role of incentives and general equilibrium effects are also discussed as possible mechanisms.