Published: Welch, Finis (ed.) The Causes and Consequences of Increasing Inequality. Chicago: University of Chicago Press, 2001
Analyses of income inequality have identified the importance of increased demand for worker skills, but characterizations of worker skills by the amount of schooling attained do not capture important aspects of the widening income distribution and of the stagnating relative wages of black workers. This paper is motivated by the possibility that schooling quality is an important component of the changing income distribution. The central analysis focuses on how governmental schooling policies particularly those related to the level and distribution of school spending affect the distribution of worker quality and of income. The substantial differences in spending across states are not significantly related to the variations in achievement growth across states. Further, the three decade old movement toward reducing the variation in school spending within states appears to have done nothing to reduce subsequent income variations of workers. Thus, the direct government policies toward school spending, as carried out in the past, have not ameliorated inequalities in incomes.