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Opting-out and income mixing in urban economies:the role of neighborhood effects

Residence-based public education systems promote income segregation across neighborhoods or school districts (e.g. Epple and Romano, 2002). It has been argued that allowing private schools to enter the market may reduce the levels of income segregation because private education severs the link among school quality and place of residence for those using a private school. On the other hand, the socalled neighborhood effects constitute another segregating force in urban areas. We use a two-neighborhood model of an urban economy in order to study whether such externalities inhibit the desegregating effects of private education or not. The analysis reveals that they may indeed reduce or completely eliminate private education induced income mixing. This will happen if the best public school is located where neighborhood effects are most beneficial. However, it may also be the case that neighborhood effects promote the mixing of high income households using a private school with low income ones using a public school in the neighborhood providing the most beneficial neighborhood effects.

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Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2004/67.

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Length: 38 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:cea:doctra:e2004_67
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  1. Luengo-Prado, Maria Jose & Volij, Oscar, 2003. "Public education, communities and vouchers," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(1), pages 51-73.
  2. Kurt Schmidheiny, 2002. "Income Stratifcation in Multi-Community Models," Diskussionsschriften dp0215, Universitaet Bern, Departement Volkswirtschaft.
  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. Robert W. Fairlie & Alexandra M. Resch, 2000. "Is There "White Flight" into Private Schools? Evidence From the National Educational Longitudinal Survey," JCPR Working Papers 211, Northwestern University/University of Chicago Joint Center for Poverty Research.
  5. Nechyba, Thomas J., 2002. "Introducing School Choice into Multi-District Public School Systems," Working Papers 02-13, Duke University, Department of Economics.
  6. BRUECKNER, Jan K. & THISSE, Jacques-François & ZENOU, Yves, . "Why is central Paris rich and downtown Detroit poor? An amenity-based theory," CORE Discussion Papers RP 1370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  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. Epple, Dennis & Nechyba, Thomas, 2004. "Fiscal decentralization," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 55, pages 2423-2480 Elsevier.
  9. Durlauf,S.N., 2003. "Neighborhood effects," Working papers 17, Wisconsin Madison - Social Systems.
  10. Thomas J. Nechyba, 2001. "Centralization, Fiscal Federalism and Private School Attendance," NBER Working Papers 8355, National Bureau of Economic Research, Inc.
  11. Thomas J. Nechyba, 2000. "Mobility, Targeting, and Private-School Vouchers," American Economic Review, American Economic Association, vol. 90(1), pages 130-146, March.
  12. Lankford, Hamilton & Wyckoff, James, 1997. "The changing structure of teacher compensation, 1970-1994," Economics of Education Review, Elsevier, vol. 16(4), pages 371-384, October.
  13. Figlio, David N. & Stone, Joe A., 2001. "Can Public Policy Affect Private School Cream Skimming?," Journal of Urban Economics, Elsevier, vol. 49(2), pages 240-266, March.
  14. Dennis Epple & Thomas Romer & Holger Sieg, 2001. "Interjurisdictional Sorting and Majority Rule: An Empirical Analysis," Econometrica, Econometric Society, vol. 69(6), pages 1437-1465, November.
  15. Lankford R. H. & Lee E. S. & Wyckoff J. H., 1995. "An Analysis of Elementary and Secondary School Choice," Journal of Urban Economics, Elsevier, vol. 38(2), pages 236-251, September.
  16. Roland Bénabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 237-264.
  17. John Conlon & Mwangi Kimenyi, 1991. "Attitudes towards race and poverty in the demand for private education: The case of Mississippi," The Review of Black Political Economy, Springer;National Economic Association, vol. 20(2), pages 5-22, December.
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