It is widely recognized that the relationship between income level, income inequality, and the impact of public goods on health and education is complex and mutually dependent. Yet, existing studies often fail to capture how increases and decreases in such investment have uneven effects on income distribution. This study aims to analyze the impact of human capital on income inequality in India, recognizing the multi-directional relationship between public investment in human capital and income distribution outcomes.
This research examines how the asymmetric nature of human capital influences income inequality in India by employing the nonlinear autoregressive distributed lag (NARDL) model, which utilizes data spanning from 1990–91 to 2019–20. Control variables include GDP per capita, poverty gap, inflation rate, and population growth rate.
The findings indicate a notable long-term asymmetric influence of human capital on income disparity. Notably, increased education expenditures in India are associated with rising income inequality, underscoring the role of quality and access disparities in education systems. Health expenditures show an inverse pattern, with spending cuts leading to heightened inequality. These findings underscore the importance of equity, access, and efficiency in public investment.
To the best of the authors’ knowledge, this is the first study to jointly examine the asymmetric effects of both education and health expenditures on income inequality in India using the NARDL framework. It contributes new empirical insights by extending the time series to 2019–20 and taking into account recent policy shifts. The study offers policy-relevant guidance on how direction-specific investment in human capital shapes inequality dynamics.
