The Impact of Extending Compulsory Education on Income Inequality

Abstract

Income inequality has critical implications for economic development, social stability, and the achievement of common prosperity. Among various policy tools, extending the duration of compulsory education is a long-term, inclusive, and practical approach, but its net effect on income distribution remains unclear. This study assembles an international panel dataset of 85 countries from 1990--2024 and employs a rigorous causal inference framework to identify the impact of extending compulsory schooling on income inequality. Using country- and year-fixed-effects OLS regressions and an event study around the first policy change, we find that each additional year of legally mandated schooling reduces the Gini index by approximately 0.9 points on average (p < 0.01). An event study confirms a negative effect at the time of reform implementation, which becomes larger over the subsequent few years, indicating a sustained decrease in inequality. Mechanistic analysis suggests that extended compulsory education increases median educational attainment and compresses skill premiums: countries with longer compulsory schooling tend to have higher average years of schooling among adults (correlation ~0.30), which in turn is associated with lower income inequality. Policy implications: Extending compulsory education can significantly reduce income inequality, but it should be accompanied by improvements in education quality and complementary vocational training to ensure that additional schooling years translate into measurable human capital gains and a more equitable income distribution.