Public high school expansion and income inequality: Revisiting the race between education and technology

This paper examines the drivers of income inequality during the expansion of secondary education. We build a general equilibrium model with endogenous demand and supply of high school graduates and show that skill-biased technological change alone cannot explain the rise in educational attainment alongside the decline in the skill premium during the American high school movement. Instead, increased public spending on secondary education is key. Calibrating the model to U.S. data from 1830 to 1980, we assess the joint effects of technological change and education policy on long-run inequality. Through counterfactual historical analysis, we demonstrate that the expansion of public secondary education played a pivotal role in reducing income disparities during the 20th century. Panel regression for the 49 states give further evidence for the public spending channel.