Education as a Mechanism for Reducing Income Inequality: The Mediating Role of Human Capital and Moderating Influence of Inclusive Economic Growth

Abstract

One of the current challenges affecting developed and developing nations is income inequality, which has perpetuated poverty cycles due to differences in access to resources, skills, and economic opportunities. It is no secret that education has been noted to be a key tool in reducing inequality through the improvement of human capital, higher productivity, and social mobility. Based on the Human Capital Theory and Distributional Growth Theory, the present study examines both indirect and direct impacts of education on income inequality. In particular, it looks at how human capital development plays the mediating role and how inclusive economic growth plays the moderating role. The survey data on 500 working adults were gathered with the help of the cross-sectional quantitative design, and the hypotheses were tested with the help of the Partial Least Squares Structural Equation Modeling (PLS-SEM). The results have shown that inclusive economic growth enhances the effect of education on human capital accumulation, and education will lead to a reduction in income inequality, both directly and indirectly, through human capital formation. These findings support the need to combine education policy with inclusive economic policies to achieve optimal, equitable outcomes. The research has practical implications for policymakers, pointing out the necessity of quality education, skills improvement, and inclusive growth policies towards social and economic equity.