STUDENT SCHOLAR SHOWCASE
The Effect of Education on Income Inequality in Wisconsin
Kyle Pulvermacher Senior Research Assistant, CBEI
Introduction Over the past 40 years, income inequality has been increasing in the United States, and researchers agree that education is likely playing a role. In recent years, they argue, “technological innovation has favored knowledge-based occupations,” leading to an imbalance in the supply and demand of high-skilled labor (Wallace and Cray). As a result, rapid gains in income have disproportionately been realized by college graduates (Yang and Gao). While previous studies have analyzed the relationship between postsecondary education and income inequality on the national level, this research focuses on the economic relationship between these variables using county-level data from Wisconsin in 2020. Model Specification After reviewing extensive literature on the topic and searching for county-level measures in Wisconsin, I carefully selected the variables for my regression model, summarized in the table below.
Variable
Description
Source
IncIneq (dep.)
Income inequality ratio
U.S. Census Bureau U.S. Census Bureau U.S. Census Bureau U.S. Census Bureau U.S. Census Bureau U.S. Census Bureau
PctCol PctHS
Percent of population with bachelor’s degree or higher Percent of population with high school diploma or higher
PopDensHND
Population density
PctWhite
Percent of population that is white
MedIncThous
Median household income Average unemployment rate
Unemp
U.S. Bureau of Labor Statistics UW-Madison Center for Community Economic Development
FarmEmp
On farm contribution to employment
LargeCity
Dummy takes value 1 if county has a large city
U.S. Census Bureau
Results Using the statistical software package Stata, I was able to run several regressions. Based on the data, the software determines the combination of explanatory variables that most accurately predicts income inequality for each county. The scatterplot with the line of best fit gives us an idea of the positive relationship between income inequality and the level of college attainment for each county. When controlling for all the variables specified above, the final regression model accounted for much more variation in income inequality and identified a statistically significant, positive association between income inequality and postsecondary educational attainment.
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Center for Business and Economic Insight
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