Family Matters : Equality of Opportunity for Skill Formation and How Educational Spending Policies Affect It

Abstract: In recent decades, inequality of outcomes and of opportunity has increased around the world. Many previous studies on inequality have shown the effects of socioeconomic background on income and education, but few have examined its effects on the skills that determine those very outcomes. This thesis aims to contribute to the skill formation literature by examining how family circumstances affect student test scores on the PISA exam, functioning as a proxy for ability. Furthermore, we study how education spending policies influence the equality of opportunity for ability attainment. Through a set of OLS regressions, we show that family circumstances do affect an individual’s ability. Furthermore, we find that public expenditures on primary to secondary education compensate for the effect of such socioeconomic circumstances on ability, while public spending on early childhood education seemingly exacerbates it.