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Equity and Resources: An Analysis of Education Finance Systems

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  • Raquel Fernandez
  • Richard Rogerson

Abstract

We analyze five education finance systems: local, state, foundation, power equalizing with recapture (PER), and power equalizing without recapture (PEN). In a calibrated model, we find that finance systems have large effects on educational resources and equity. The trade-off between equity and resources, however, is not monotone. Ranking systems by expected utility, we find that PER consistently ranks highest, though it provides fewer resources to education than the foundation and PEN systems and is less equitable than a state system. We prove that for an important subset of preferences, PER will win in majority voting comparisons with the other systems.

Suggested Citation

  • Raquel Fernandez & Richard Rogerson, 2003. "Equity and Resources: An Analysis of Education Finance Systems," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 858-897, August.
  • Handle: RePEc:ucp:jpolec:v:111:y:2003:i:4:p:858-897
    DOI: 10.1086/375381
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    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • I2 - Health, Education, and Welfare - - Education

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