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Education finance reform and investment in human capital: lessons from California

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  • Fernández, Raquel
  • Rogerson, Richard

Abstract

This paper examines the effect of different education financing systems on the level and distribution of resources devoted to public education. We focus on California, which in the 1970's moved from a system of mixed local and state financing to one of effectively pure state finance and subsequently saw its funding of public education fall between ten and fifteen percent relative to the rest of the US. We show that a simple political economy model of public finance can account for the bulk of this drop. We find that while the distribution of spending became more equal, this was mainly at the cost of a large reduction in spending in the wealthier communities with little increase for the poorer districts. Our model implies that there is no simple trade-off between equity and resources; we show that if California had moved to the opposite extreme and abolished state aid altogether, funding for public education would also have dropped by almost ten percent.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 74 (1999)
Issue (Month): 3 (December)
Pages: 327-350

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Handle: RePEc:eee:pubeco:v:74:y:1999:i:3:p:327-350

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Web page: http://www.elsevier.com/locate/inca/505578

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  1. Westhoff, Frank, 1977. "Existence of equilibria in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 14(1), pages 84-112, February.
  2. Robert Manwaring & Steven Sheffrin, 1997. "Litigation, School Finance Reform, and Aggregate Educational Spending," International Tax and Public Finance, Springer, vol. 4(2), pages 107-127, May.
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  7. Bénabou, Roland, 1993. "Heterogeneity, Stratification and Growth," CEPR Discussion Papers 815, C.E.P.R. Discussion Papers.
  8. Raquel Fernandez & Richard Rogerson, 1995. "Education Finance Reform and Investment in Human Capital: Lessons from California," NBER Working Papers 5369, National Bureau of Economic Research, Inc.
  9. Gerhard Glomm & B. Ravikumar, 1998. "Opting out of publicly provided services: A majority voting result," Social Choice and Welfare, Springer, vol. 15(2), pages 187-199.
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  18. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
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  22. Downes, Thomas A. & Schoeman, David, 1998. "School Finance Reform and Private School Enrollment: Evidence from California," Journal of Urban Economics, Elsevier, vol. 43(3), pages 418-443, May.
  23. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  24. Raquel Fernandez & Richard Rogerson, 1997. "Education finance reform: A dynamic perspective," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 67-84.
  25. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1996. "Are consumption taxes really better than income taxes?," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 475-503, June.
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