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Equalizing Opportunity for Racial and Socioeconomic Groups in the United States Through Educational Finance Reform

Listed author(s):
  • Betts, Julian
  • Roemer, John E.

We analyze the reallocations of educational expenditures required to equalize opportunities (taken to be wage income), according to the theory of Roemer (1998). Using the NLSYM data set, we find that implementing an equal-opportunity policy across men of different races, by using educational finance as the instrument, and ensuring that no race received less than the average observed nationally, would require spending nine times as much on black students, per capita, as on white students. Even the lower bound of bootstrapped confidence intervals for the policy estimates suggests large reallocations between races. The equal-opportunity policy across men from different socio-economic backgrounds that ignores race does almost nothing to equalize wages across races. For inter-racial allocations, we find evidence of a tradeoff between equity and total product, with reallocation lowering the wage bill by about 5%. In contrast, for reallocations based on parental education, equalization increases the wage bill by about 2% because the impact of school spending appears to be slightly higher for those with less highly educated parents.

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Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt0gq4z4m9.

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Date of creation: 01 Dec 2005
Handle: RePEc:cdl:ucsdec:qt0gq4z4m9
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  1. David Card & Alan B. Krueger, 1996. "Labor Market Effects of School Quality: Theory and Evidence," NBER Working Papers 5450, National Bureau of Economic Research, Inc.
  2. repec:fth:prinin:357 is not listed on IDEAS
  3. Grogger, Jeff, 1996. "School Expenditures and Post-schooling Earnings: Evidence from High School and Beyond," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 628-637, November.
  4. Betts, Julian R, 1995. "Does School Quality Matter? Evidence from the National Longitudinal Survey of Youth," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 231-250, May.
  5. David Card & Alan Krueger, 1996. "Labor Market Effects of School Quality: Theory and Evidence," Working Papers 736, Princeton University, Department of Economics, Industrial Relations Section..
  6. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
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