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Inequality in Public School Spending across Space and Time

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  • Sørensen, Bent E
  • Biolsi, Christopher
  • Craig, Steven G.
  • Dhar, Amrita

Abstract

This paper takes a novel time series perspective on K-12 school spending. About half of school spending is financed by state government aid to local districts. Because state aid is generally income conditioned, with low-income districts receiving more aid, state aid acts as a mechanism for risk sharing between school districts. We show that temporal inequality, due to state and local business cycles, is prevalent across the income distribution. We estimate a model of local revenue and state aid, and its allocation across districts, and use the parameters to simulate impulse response functions. We find that state aid provides risk sharing for local shocks, although slow speed of adjustment results in temporal inequality. There is little risk sharing for statewide income shocks, and the risk from such shocks to school spending is more severe in low income districts because of their greater reliance on state aid.

Suggested Citation

  • Sørensen, Bent E & Biolsi, Christopher & Craig, Steven G. & Dhar, Amrita, 2021. "Inequality in Public School Spending across Space and Time," CEPR Discussion Papers 15666, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15666
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    Cited by:

    1. Christopher Biolsi & H. Youn Kim, 2021. "Analyzing state government spending: balanced budget rules or forward-looking decisions?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(4), pages 1035-1079, August.

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    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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