THREE competing hypotheses have been advanced concerning the effect of government education spending and finance on income distribution. One hypothesis is that educational spending leads to income redistribution in favour of the poor. The alternative hypothesis is that educational spending results in an even wider gap between rich and poor. Finally, there is the null hypothesis, which holds that the aggregate distribution of income is determined by many things other than education which, by this hypothesis, has little or no effect. These hypotheses apply to the effects of education spending and finance on the size distribution of income within a generation and to the effects upon movement between (relative) income classes between generations. The primary purpose of this paper is to empirically test among both the intraand the inter-generational version of these three hypotheses for higher (i.e. post-secondary) levels of education for one less developed country, Kenya.2 A secondary purpose is to investigate other economic aspects of spending on higher education, most notably the question of horizontal equity in school finance. Before proceeding, a methodological point is in order. There is no consensus in the public economics literature on what is a suitable criterion for assessing the equitability of a fiscal programme.3 At least three criteria may be distinguished (the terminology is my own): (1) The Equal