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School Finance, Spatial Income Segregation and the Nature of Communities

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  • Nechyba, Thomas J.

Abstract

While the issue of school finance has been studied extensively, relatively little effort has been devoted to understanding how school finance policies impact the nature of communities. This is peculiar in light of substantial evidence that public school quality, at least in the U.S., has much to do with residential choices by households, and in light of increasing empirical evidence that residential segregation perpetuates income inequality. In this paper, I emphasize in particular the importance of considering not only the level of government that is funding public schools but also the role played by the private sector as well as its interaction with the existing public school system. Somewhat surprisingly, simulation results based on U.S. data suggest that, in terms of producing spatial income segregation, the role of centralization versus decentralization of public school financing is quite secondary to the role played by the private sector. A purely public school system, regardless of the degree of centralization of school finance, results in substantially more spatial segregation than a purely private system. However, it is the combination of a (centralized or decentralized) public system with a private school market that yields the least residential segregation as housing price distortions from the capitalization of the public system generate incentives for middle and high income private school attendees to live with lower income public school attendees. Motivated by this insight, additional simulations involving explicit government support for private schools in the form of vouchers are reported, and the sensitivity of results to alternative school production models is tested.

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Paper provided by Duke University, Department of Economics in its series Working Papers with number 02-17.

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Date of creation: 2002
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Handle: RePEc:duk:dukeec:02-17

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Citations

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Cited by:
  1. Rainald Borck, 2006. "Central versus Local Education Finance: A Political Economy Approach," Discussion Papers of DIW Berlin 565, DIW Berlin, German Institute for Economic Research.
  2. Leonid V. Azarnert, 2011. "Integrated Public Education, Fertility and Human Capita," Working Papers 2011-24, Department of Economics, Bar-Ilan University.
  3. Amy Ellen Schwartz & Ioan Voicu & Keren Mertens Horn, 2014. "Do Choice Schools Break the Link Between Public Schools and Property Values? Evidence from House Prices in New York City," Working Papers 23, University of Massachusetts Boston, Economics Department.
  4. Thomas J. Nechyba, 2006. "Alternative education finance strategies," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Mar, pages 7-27.
  5. Stephen Gibbons & Stephen Machin & Olmo Silva, 2008. "Choice, Competition, and Pupil Achievement," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 912-947, 06.
  6. Louafi Bouzouina & Dominique Mignot, 2005. "Disparités de revenus à différentes échelles spatiales en France de 1985 à 2001," Post-Print halshs-00108437, HAL.
  7. Nguyen-Hoang, Phuong & Yinger, John, 2011. "The capitalization of school quality into house values: A review," Journal of Housing Economics, Elsevier, vol. 20(1), pages 30-48, March.
  8. Machin, Stephen, 2011. "Houses and schools: Valuation of school quality through the housing market," Labour Economics, Elsevier, vol. 18(6), pages 723-729.
  9. Berardino Cesi, 2009. "Local public education and childless voting : the arising of an "ends with the middle" coalition," THEMA Working Papers 2009-07, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  10. Brunner, Eric J. & Cho, Sung-Woo & Reback, Randall, 2012. "Mobility, housing markets, and schools: Estimating the effects of inter-district choice programs," Journal of Public Economics, Elsevier, vol. 96(7), pages 604-614.
  11. Cohen-Zada, Danny & Justman, Moshe, 2005. "The religious factor in private education," Journal of Urban Economics, Elsevier, vol. 57(3), pages 391-418, May.
  12. Leonid V. Azarnert, 2008. "Involuntary Integration in Public Education, Fertility and Human Capital," Working Papers 2008-07, Department of Economics, Bar-Ilan University.
  13. Thomas Nechyba, 2004. "School Choice and School Quality in the US," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 2(4), pages 33-38, 01.
  14. Luis Fernando Gamboa & Mauricio Rodríguez-Acosta & Andrés Felipe García-Suaza, 2010. "Academic achievement in sciences: the role of preferences and educative assets," DOCUMENTOS DE TRABAJO 006701, UNIVERSIDAD DEL ROSARIO.
  15. Quigley, John M., 2008. "Local Public Finance," Berkeley Program on Housing and Urban Policy, Working Paper Series qt3z67z3p0, Berkeley Program on Housing and Urban Policy.

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