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Budget-Maximizing Bureaucracy and the Effects of State Aid on School Expenditures

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  • John H. Beck

    (Case Western Reserve University)

Abstract

This article estimates expenditure equations for Michigan school districts using Kelejian's (1971) procedure for dealing with the endogenous state aid variables. Alternative specifications of the expenditure equation are derived, based on (i) a median voter model and (ii) Niskanen's (1971) budget-maximizing model. Theoretical considerations imply different specifications of the aid variables than have been used in previous empirical work. The estimated effect of grants-in-aid is a larger increase in expenditures than is consistent with model (i) but less than is consistent with model (ii).

Suggested Citation

  • John H. Beck, 1981. "Budget-Maximizing Bureaucracy and the Effects of State Aid on School Expenditures," Public Finance Review, , vol. 9(2), pages 159-182, April.
    • Handle: RePEc:sae:pubfin:v:9:y:1981:i:2:p:159-182
    DOI: 10.1177/109114218100900203
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    References listed on IDEAS

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    1. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492, National Bureau of Economic Research, Inc.
    2. Edward M. Gramlich & Harvy Galper, 1973. "State and Local Fiscal Behavior and Federal Grant Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 15-66.
    3. David F. Bradford & Wallace E. Oates, 1971. "The Analysis of Revenue Sharing in a New Approach to Collective Fiscal Decisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(3), pages 416-439.
    4. Feldstein, Martin S, 1975. "Wealth Neutrality and Local Choice in Public Education," American Economic Review, American Economic Association, vol. 65(1), pages 75-89, March.
    5. Barlow, Robin, 1970. "Efficiency Aspects of Local School Finance," Journal of Political Economy, University of Chicago Press, vol. 78(5), pages 1028-1040, Sept.-Oct.
    6. Shmuel Nitzan, 1977. "Revenue Sharing in Multiperson Public Choice Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 91(2), pages 315-326.
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    Cited by:

    1. Mark Chandler, 2005. "The Median-Voter Model versus the Bureaucracy Model of School Finance Equalization Aid," Public Finance Review, , vol. 33(1), pages 62-83, January.
    2. Rhee, Se-Koo, 1996. "The impact of intergovernmental grants-in-aid on public school expenditure under the segregated school system," ISU General Staff Papers 1996010108000012396, Iowa State University, Department of Economics.
    3. Robert Logan & J. O'Brien, 1989. "Fiscal illusion, budget maximizers, and dynamic equilibrium," Public Choice, Springer, vol. 63(3), pages 221-235, December.
    4. Trang Hoang & Craig S. Maher, 2022. "Fiscal condition, institutional constraints, and public pension contribution: are pension contribution shortfalls fiscal illusion?," Public Budgeting & Finance, Wiley Blackwell, vol. 42(4), pages 93-124, December.

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