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Income Stratification Across Public and Private Education: The Multi-community Case

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  • Francisco Martinez Mora

Abstract

This paper analyses the question of which households opt out of public education in a multi-community economy with local school finance and housing markets. In particular, the objective is to investigate whether perfect income stratification across public and private educational sectors predicted by single jurisdiction models and by multiple jurisdiction ones without housing markets holds in this setting. Nechyba (1999) has shown that the existence of a fixed stock of heterogeneous houses can prevent perfect income stratification from arising in equilibrium. Here we demonstrate that, even with homogeneous housing, perfect income stratification is not assured. On the contrary, it is possible to find equilibria in which households from intermediate income intervals use private schools, while richer ones prefer to send their youths to a local public school of higher quality. The emergence of very high quality public schools that attract students from the best-off households and survive the competition of private schools is therefore possible. The paper identifies a new way whereby housing markets affect how the market for education works.

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Paper provided by Department of Economics, University of York in its series Discussion Papers with number 03/01.

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Handle: RePEc:yor:yorken:03/01

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  1. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
  2. Gerhard Glomm & B. Ravikumar, 1998. "Opting out of publicly provided services: A majority voting result," Social Choice and Welfare, Springer, vol. 15(2), pages 187-199.
  3. Dennis Epple & Richard Romano, 2000. "Neighborhood Schools, Choice, and the Distribution of Educational Benefits," NBER Working Papers 7850, National Bureau of Economic Research, Inc.
  4. Volij, Oscar & Prado, Maria, 2003. "Public Education, Communities, and Vouchers," Staff General Research Papers 10127, Iowa State University, Department of Economics.
  5. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-58, August.
  6. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
  7. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1993. "Existence of voting and housing equilibrium in a system of communities with property taxes," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 585-610, November.
  8. Hoxby, Caroline M., 1999. "The productivity of schools and other local public goods producers," Journal of Public Economics, Elsevier, vol. 74(1), pages 1-30, October.
  9. Hanushek, E.A.omson, W., 1996. "Assessing the Effects of School Resources on Student Performance : An Update," RCER Working Papers 424, University of Rochester - Center for Economic Research (RCER).
  10. 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.
  11. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  12. de Bartolome, Charles A M, 1990. "Equilibrium and Inefficiency in a Community Model with Peer Group Effects," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 110-33, February.
  13. Wooders, Myrna Holtz, 1989. "A Tiebout theorem," Mathematical Social Sciences, Elsevier, vol. 18(1), pages 33-55, August.
  14. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
  15. Rangazas, Peter, 1995. "Vouchers in a community choice model with zoning," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(1), pages 15-39.
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