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The Capitalization of Education Finance Reforms

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  • Dee, Thomas S

Abstract

The education finance reforms encouraged by state court rulings over the past 25 years have led to increased state aid and educational spending in poorer school districts. This empirical study addresses whether these new resources were capitalized into the housing values and residential rents within those districts. Estimations based on district-level census data indicate that the new educational expenditures generated by the court mandates substantially increased median housing values and residential rents. This Tiebout response implies that court-mandated finance reforms increased the perceived quality of the poorer school districts in reform states. However, the existence and magnitude of this response also implies that these reforms had unintended distributional consequences. For example, these results indicate that for some the redistributive impact of education finance reform may have been sharply attenuated by the increased cost of residing in the districts that received new educational resources. Copyright 2000 by the University of Chicago.

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  • Dee, Thomas S, 2000. "The Capitalization of Education Finance Reforms," Journal of Law and Economics, University of Chicago Press, vol. 43(1), pages 185-214, April.
  • Handle: RePEc:ucp:jlawec:v:43:y:2000:i:1:p:185-214
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    File URL: http://dx.doi.org/10.1086/467452
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    References listed on IDEAS

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    5. T. A. Downes & D. N. Figlio, "undated". "School Finance Reforms, Tax Limits, and Student Performance: Do Reforms Level Up or Dumb Down?," Institute for Research on Poverty Discussion Papers 1142-97, University of Wisconsin Institute for Research on Poverty.
    6. Aaronson, Daniel, 1999. "The Effect of School Finance Reform on Population Heterogeneity," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(1), pages 5-29, March.
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    Cited by:

    1. Feng, Hao & Lu, Ming, 2013. "School quality and housing prices: Empirical evidence from a natural experiment in Shanghai, China," Journal of Housing Economics, Elsevier, vol. 22(4), pages 291-307.
    2. Stephanie Riegg Cellini & Fernando Ferreira & Jesse Rothstein, 2008. "The Value of School Facilities: Evidence from a Dynamic Regression Discontinuity Design," Working Papers 1104, Princeton University, Woodrow Wilson School of Public and International Affairs, Education Research Section..
    3. 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.
    4. Epple, Dennis & Ferreyra, Maria Marta, 2008. "School finance reform: Assessing general equilibrium effects," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1326-1351, June.
    5. repec:pri:cepsud:180rothstein is not listed on IDEAS
    6. Dills Angela K., 2004. "Do Parents Value Changes in Test Scores? High Stakes Testing in Texas," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-34, August.
    7. Chakrabarti, Rajashri & Roy, Joydeep, 2015. "Housing markets and residential segregation: Impacts of the Michigan school finance reform on inter- and intra-district sorting," Journal of Public Economics, Elsevier, vol. 122(C), pages 110-132.
    8. Christian A. L. Hilber & Christopher J. Mayer, 2004. "Why Do Households Without Children Support Local Public Schools?," NBER Working Papers 10804, National Bureau of Economic Research, Inc.
    9. 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.
    10. Noel D. Campbell & Andres Jauregui & Kirk C. Heriot, 2008. "Housing Prices and Economic Freedom," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 23(Spring 20), pages 1-17.
    11. Thomas A. Downes, 2002. "Do state governments matter?: a review of the evidence on the impact on educational outcomes of the changing role of the states in the financing of public education," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 47(Jun), pages 143-180.
    12. Maria Marta Ferreyra, 2009. "An Empirical Framework for Large-Scale Policy Analysis, with an Application to School Finance Reform in Michigan," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 147-180, February.
    13. Hilber, Christian A.L. & Mayer, Christopher, 2009. "Why do households without children support local public schools? Linking house price capitalization to school spending," Journal of Urban Economics, Elsevier, vol. 65(1), pages 74-90, January.
    14. Joydeep Roy, 2004. "Effect of a School Finance Reform on Housing Stock and Residential Segregation: Evidence from Proposal A in Michigan," Public Economics 0412004, EconWPA.
    15. Jeffrey Cohen, 2006. "The impacts of education spending and finance reform on manufacturing property shadow values: a cost function approach," Journal of Productivity Analysis, Springer, vol. 26(2), pages 181-190, October.

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