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Education finance reform: A dynamic perspective

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Author Info

  • Raquel Fernandez

    (Department of Economics, New York University, 269 Mercer Street, New York, New York 10003)

  • Richard Rogerson

    (Department of Economics, University of Minnesota)

Abstract

We use a dynamic Tiebout model to analyze the consequences of moving from a pure local system of education finance to a pure state system of finance in which each student receives the same resources. While much of the education finance literature focuses on the static or immediate effects of such a change, our analysis also examines the dynamic effects. Numerical simulations for a calibrated version of our model indicate that these dynamic effects are very important. Comparing steady states, we find that aggregate welfare increases on the order of 10 percent following the switch to a state system. The key to this welfare gain is that a local system yields inefficiently low investment in human capital of children from low-income families.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

Volume (Year): 16 (1997)
Issue (Month): 1 ()
Pages: 67-84

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Handle: RePEc:wly:jpamgt:v:16:y:1997:i:1:p:67-84

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Web page: http://www3.interscience.wiley.com/journal/34787/home

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References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  2. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-58, August.
  3. 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.
  4. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1984. "Equilibrium among local jurisdictions: toward an integrated treatment of voting and residential choice," Journal of Public Economics, Elsevier, vol. 24(3), pages 281-308, August.
  5. Silva, Fabio & Sonstelie, Jon, 1995. "Did Serrano Cause a Decline in School Spending," National Tax Journal, National Tax Association, vol. 48(2), pages 199-215, June.
  6. Dennis Epple & Richard Romano, 2000. "Neighborhood Schools, Choice, and the Distribution of Educational Benefits," NBER Working Papers 7850, National Bureau of Economic Research, Inc.
  7. Bergstrom, Theodore C & Rubinfeld, Daniel L & Shapiro, Perry, 1982. "Micro-Based Estimates of Demand Functions for Local School Expenditures," Econometrica, Econometric Society, vol. 50(5), pages 1183-1205, September.
  8. Fernández, Raquel & Rogerson, Richard, 1999. "Education finance reform and investment in human capital: lessons from California," Journal of Public Economics, Elsevier, vol. 74(3), pages 327-350, December.
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Citations

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Cited by:
  1. 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.
  2. Eric A. Hanushek & John F. Kain & Steven G. Rivkin, 2001. "Disruption versus Tiebout Improvement: The Costs and Benefits of Switching Schools," NBER Working Papers 8479, National Bureau of Economic Research, Inc.
  3. Goodspeed, Timothy J., 1998. "The Relationship Between State Income Taxes and Local Property Taxes: Education Finance in New Jersey," National Tax Journal, National Tax Association, vol. 51(n. 2), pages 219-38, June.
  4. Hung-ju Chen, 2003. "Educational Systems, Growth and Income Distribution: A Quantitative Study," Computing in Economics and Finance 2003 13, Society for Computational Economics.
  5. Raquel Fernandez, 2001. "Sorting, Education and Inequality," NBER Working Papers 8101, National Bureau of Economic Research, Inc.
  6. T. A. Downes & D. N. Figlio, . "School Finance Reforms, Tax Limits, and Student Performance: Do Reforms Level Up or Dumb Down?," Institute for Research on Poverty Discussion Papers 1142-97, University of Wisconsin Institute for Research on Poverty.
  7. Fernandez, Raquel, 2002. "Education, segregation and marital sorting: theory and an application to the UK," European Economic Review, Elsevier, vol. 46(6), pages 993-1022, June.
  8. Holtz-Eakin, Douglas & Lovely, Mary E. & Tosun, Mehmet S., 2004. "Generational conflict, fiscal policy, and economic growth," Journal of Macroeconomics, Elsevier, vol. 26(1), pages 1-23, March.
  9. Thomas Downes, 2003. "School Finance Reform and School Quality: Lessons from Vermont," Discussion Papers Series, Department of Economics, Tufts University 0309, Department of Economics, Tufts University.

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