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Central versus Local Education Finance: A Political Economy Approach

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  • Rainald Borck

Abstract

This paper models voters' preferences over central versus local education policies when there are private alternatives. Education is financed by income taxes and individuals are mobile between communities. Public education levels are chosen by majority vote. Contrary to conventional wisdom, centralisation may benefit the rich and poor, while the middle class prefer decentralised education. The model is also extended to include peer effects. Peer effects increase the support for central school finance, even in the community with good public schools.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.44135.de/dp565.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 565.

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Length: 19 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp565

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Keywords: Education; centralisation; private school; majority voting;

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References

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  1. Hansen, Nico A. & Kessler, Anke S., 2001. "(Non-)Existence of Equilibria in Multicommunity Models," Journal of Urban Economics, Elsevier, vol. 50(3), pages 418-435, November.
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  6. Nechyba, Thomas J, 1999. " School Finance Induced Migration and Stratification Patterns: The Impact of Private School Vouchers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 5-50.
  7. Fernandez, Raquel & Rogerson, Richard, 1997. "Eudcation Finance Reform and Investment in Human Capital : Lessons from California," Working Papers, C.V. Starr Center for Applied Economics, New York University 97-21, C.V. Starr Center for Applied Economics, New York University.
  8. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, Elsevier, vol. 3(4), pages 349-385, November.
  9. Nechyba, Thomas J., 2002. "Centralization, Fiscal Federalism and Privte School Attendance," Working Papers, Duke University, Department of Economics 02-11, Duke University, Department of Economics.
  10. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, American Economic Association, vol. 88(1), pages 33-62, March.
  11. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, Elsevier, vol. 62(3), pages 297-325, November.
  12. Hendrik Jürges & Kerstin Schneider & Felix Büchel, 2003. "The Effect of Central Exit Examinations on Student Achievement: Quasi-experimental Evidence from TIMSS Germany," CESifo Working Paper Series 939, CESifo Group Munich.
  13. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, American Economic Association, vol. 82(3), pages 409-29, June.
  14. Raquel Fernandez & Richard Rogerson, 1999. "Equity and Resources: An Analysis of Education Finance Systems," NBER Working Papers 7111, National Bureau of Economic Research, Inc.
  15. Bolton, Patrick & Roland, Gérard, 1995. "The Break up of Nations: A Political Economy Analysis," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1225, C.E.P.R. Discussion Papers.
  16. Cohen-Zada, Danny & Justman, Moshe, 2003. "The political economy of school choice: linking theory and evidence," Journal of Urban Economics, Elsevier, vol. 54(2), pages 277-308, September.
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Cited by:
  1. Marcelin Joanis, 2009. "Sharing the blame? Local electoral accountability and centralized school finance in California," Working Papers 2009/33, Institut d'Economia de Barcelona (IEB).
  2. Ulrich Oberndorfer & Viktor Steiner, 2007. "Generationen- oder Parteienkonflikt? Eine empirische Analyse der deutschen Hochschulausgaben," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 8(2), pages 165-183, 03.
  3. Niklas Potrafke, 2006. "Parties Matter in Allocating Expenditures: Evidence from Germany," Discussion Papers of DIW Berlin 652, DIW Berlin, German Institute for Economic Research.
  4. Ulrich Oberndorfer & Viktor Steiner, 2006. "Generationen- oder Parteienkonflikt?: Eine empirische Analyse der deutschen Hochschulausgaben," Discussion Papers of DIW Berlin 603, DIW Berlin, German Institute for Economic Research.
  5. Oberndorfer, Ulrich & Steiner, Viktor, 2006. "Intergenerational Conflict, Partisan Politics, and Public Higher Education Spending: Evidence from the German States," IZA Discussion Papers 2417, Institute for the Study of Labor (IZA).

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