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A Distributional Difference-in-Difference Evaluation of the Response of School Expenditures to Reforms and Tax Limits


  • Daniel P. McMillen

    () (Department of Economics and Institute of Government and Public Affairs, University of Illinois)

  • Larry D. Singell Jr.

    () (Department of Economics, University of Oregon)


Prior work uses a parametric approach to study the distributional effects of school finance reform and finds evidence that reform yields greater equality of school expenditures by lowering spending in high-spending districts (leveling down) or increasing spending in low-spending districts (leveling up). We develop a kernel density difference-in-difference approach to isolate how tax limits and/or education finance reform affect the full distribution of education expenditures. Simulations of the difference in distributional differences across school finance regimes over time suggest that parametric approaches offer an incomplete description of the distributional impacts of policy changes. Using data for the population of U.S. school districts in 1972, 1982, and 1992, we find that educational reforms and tax limits yield greater equality of expenditures by reducing the number of districts in the tails of the distribution, particularly when both are adopted during the same decade. Our results also suggest that the incompleteness of the parametric descriptions used in prior work can suggest greater variation in the distributional consequences of reform than is actually present. © 2010 American Education Finance Association

Suggested Citation

  • Daniel P. McMillen & Larry D. Singell Jr., 2010. "A Distributional Difference-in-Difference Evaluation of the Response of School Expenditures to Reforms and Tax Limits," Education Finance and Policy, MIT Press, vol. 5(3), pages 349-377, July.
  • Handle: RePEc:tpr:edfpol:v:5:y:2010:i:3:p:349-377

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    References listed on IDEAS

    1. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
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    5. Hoyt Bleakley & Aimee Chin, 2004. "Language Skills and Earnings: Evidence from Childhood Immigrants," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 481-496, May.
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    More about this item


    school expenditures; school finance reform; educational tax limits;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid


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