Against Educational Congestion: The Moderating Effect of Public Expenditure on Higher Education Expansion and Income Inequality Relationship

This study examines the relationship between higher education expansion and income inequality while the impact of education expansion on inequality has been theoretically debated and empirical studies have produced mixed results. Informed by job-competition theory, the focus of this study is income inequality affected by educational congestion in which the share of the population who completed higher education has increased from moderate to high levels under the limited higher job places for college graduates. This study also seeks to find institutional factors to create contextually differing relationship between higher education expansion and income inequality. The proportion of public spending of total expenditure on higher education is used as a proxy for different institutional settings imposed by welfare-states regimes. The empirical results based on 22 OECD countries from 2000 to 2016 show that higher education expansion has an equalizing effect on income distribution. However, the effect is attenuated as the share of population with higher education increase in the countries where public expenditure is lower while the effect is strengthened in the countries where public expenditure is higher. It suggests educational congestion has different implications in different settings.