Effect of a School Finance Reform on Housing Stock and Residential Segregation: Evidence from Proposal A in Michigan
AbstractLocal financing of public schools in the U.S. leads to a bundling of two distinct choices - residential choice and school choice - and increases the degree of socioeconomic segregation across school districts. A school finance reform can go a long way in weakening this link. In this paper I study the Michigan school finance reform of 1994 (Proposal A) which resulted in a comprehensive equalization of per pupil expenditures. Using panel data on Michigan K-12 districts and data from the decennial censuses I investigate whether the reform had any significant effects on spatial segregation. I find that Proposal A has been responsible for increases in housing stock and property values in the lowest spending school districts, and for improvements in several socioeconomic indicators, implying a decline is neighborhood sorting. However, there is continued high demand for residence in the highest spending communities, which points to the importance of neighborhood peer effects (‘local’ social capital).
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Bibliographic InfoPaper provided by EconWPA in its series Public Economics with number 0412004.
Length: 44 pages
Date of creation: 05 Dec 2004
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School finance reform; spatial segregation; Tiebout sorting; peer effects.;
Find related papers by JEL classification:
- I2 - Health, Education, and Welfare - - Education
- R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-12-12 (All new papers)
- NEP-EDU-2004-12-12 (Education)
- NEP-GEO-2004-12-12 (Economic Geography)
- NEP-URE-2004-12-12 (Urban & Real Estate Economics)
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