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Central versus Local Education Finance: A Political Economy Approach

  • Rainald Borck

This paper models voters' preferences over central versus local education policies when there are private alternatives. Education is financed by income taxes and individuals are mobile between communities. Public education levels are chosen by majority vote. Contrary to conventional wisdom, centralisation may benefit the rich and poor, while the middle class prefer decentralised education. The model is also extended to include peer effects. Peer effects increase the support for central school finance, even in the community with good public schools.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.44135.de/dp565.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 565.

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Length: 19 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp565
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  1. Hansen, Nico A. & Kessler, Anke S., 2001. "(Non-)Existence of Equilibria in Multicommunity Models," Journal of Urban Economics, Elsevier, vol. 50(3), pages 418-435, November.
  2. Hendrik Jürges & Kerstin Schneider & Felix Büchel, 2005. "The Effect Of Central Exit Examinations On Student Achievement: Quasi-Experimental Evidence From TIMSS Germany," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1134-1155, 09.
  3. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  4. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
  5. Raquel Fernandez & Richard Rogerson, 1995. "Education Finance Reform and Investment in Human Capital: Lessons from California," NBER Working Papers 5369, National Bureau of Economic Research, Inc.
  6. Nechyba, Thomas J, 1999. " School Finance Induced Migration and Stratification Patterns: The Impact of Private School Vouchers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 5-50.
  7. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
  8. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-29, June.
  9. Bolton, Patrick & Roland, Gerard, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1057-90, November.
  10. Nechyba, Thomas, 2003. "School finance, spatial income segregation, and the nature of communities," Journal of Urban Economics, Elsevier, vol. 54(1), pages 61-88, July.
  11. Nechyba, Thomas J., 2002. "Centralization, Fiscal Federalism and Privte School Attendance," Working Papers 02-11, Duke University, Department of Economics.
  12. 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.
  13. JOUVET, Pierre-André & MICHEL, Philippe & PESTIEAU, Pierre, . "Public and private environmental spending: a political economy approach," CORE Discussion Papers RP -2060, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Cohen-Zada, Danny & Justman, Moshe, 2003. "The political economy of school choice: linking theory and evidence," Journal of Urban Economics, Elsevier, vol. 54(2), pages 277-308, September.
  15. Alesina, Alberto & Spolaore, Enrico, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1027-56, November.
  16. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
  17. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
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