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School Finance, Spatial Income Segregation and the Nature of Communities

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  • Nechyba, Thomas J.

Abstract

While the issue of school finance has been studied extensively, relatively little effort has been devoted to understanding how school finance policies impact the nature of communities. This is peculiar in light of substantial evidence that public school quality, at least in the U.S., has much to do with residential choices by households, and in light of increasing empirical evidence that residential segregation perpetuates income inequality. In this paper, I emphasize in particular the importance of considering not only the level of government that is funding public schools but also the role played by the private sector as well as its interaction with the existing public school system. Somewhat surprisingly, simulation results based on U.S. data suggest that, in terms of producing spatial income segregation, the role of centralization versus decentralization of public school financing is quite secondary to the role played by the private sector. A purely public school system, regardless of the degree of centralization of school finance, results in substantially more spatial segregation than a purely private system. However, it is the combination of a (centralized or decentralized) public system with a private school market that yields the least residential segregation as housing price distortions from the capitalization of the public system generate incentives for middle and high income private school attendees to live with lower income public school attendees. Motivated by this insight, additional simulations involving explicit government support for private schools in the form of vouchers are reported, and the sensitivity of results to alternative school production models is tested.

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  • Nechyba, Thomas J., 2002. "School Finance, Spatial Income Segregation and the Nature of Communities," Working Papers 02-17, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:02-17
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    Cited by:

    1. Thomas J. Nechyba, 2006. "Alternative education finance strategies," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Mar, pages 7-27.
    2. Leonid V. Azarnert, 2014. "Integrated public education, fertility and human capital," Education Economics, Taylor & Francis Journals, vol. 22(2), pages 166-180, April.
    3. Emanuela di Gropello, 2006. "Meeting the Challenges of Secondary Education in Latin America and East Asia : Improving Efficiency and Resource Mobilization," World Bank Publications, The World Bank, number 7173, October.
    4. Luigi Benfratello & Giuseppe Sorrenti & Gilberto Turati, 2015. "Tracking in the Tracks in the Italian Schooling: Inequality Patterns in an Urban Context," Working papers 030, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    5. De Fraja, Gianni & Martínez-Mora, Francisco, 2014. "The desegregating effect of school tracking," Journal of Urban Economics, Elsevier, vol. 80(C), pages 164-177.
    6. Luis Fernando Gamboa & Mauricio Rodríguez-Acosta & Andrés Felipe García-Suaza, 2010. "Academic achievement in sciences: the role of preferences and educative assets," DOCUMENTOS DE TRABAJO 006701, UNIVERSIDAD DEL ROSARIO.
    7. 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.
    8. Stephen Gibbons & Stephen Machin & Olmo Silva, 2008. "Choice, Competition, and Pupil Achievement," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 912-947, June.
    9. Berardino Cesi, 2010. "Local Public Education and Childless Voting: The Arising of an “Ends with the Middle” Coalition," The IUP Journal of Public Finance, IUP Publications, vol. 0(1 & 2), pages 74-102, February .
    10. Machin, Stephen, 2011. "Houses and schools: Valuation of school quality through the housing market," Labour Economics, Elsevier, vol. 18(6), pages 723-729.
    11. Cohen-Zada, Danny & Justman, Moshe, 2005. "The religious factor in private education," Journal of Urban Economics, Elsevier, vol. 57(3), pages 391-418, May.
    12. William Clark & Regan Maas, 2012. "Schools, Neighborhoods and Selection: Outcomes Across Metropolitan Los Angeles," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 31(3), pages 339-360, June.
    13. Atsushi Yoshida & Katsuo Kogure & Koichi Ushijima, 2009. "School Choice And Student Sorting: Evidence From Adachi Ward In Japan," The Japanese Economic Review, Japanese Economic Association, vol. 60(4), pages 446-472.
    14. Quigley, John M., 2008. "Local Public Finance," Berkeley Program on Housing and Urban Policy, Working Paper Series qt3z67z3p0, Berkeley Program on Housing and Urban Policy.
    15. Jean-Michel Plassard & Nhu Tran Thi Thanh, 2009. "Liberté de choix des élèves et concurrence des établissements : un survey de l'analyse du pilotage des systèmes éducatifs par les quasi-marchés," Revue d'économie industrielle, De Boeck Université, vol. 0(2), pages 99-130.
    16. Thomas Nechyba, 2004. "School Choice and School Quality in the US," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2(4), pages 33-38, 01.
    17. Pancs, Romans & Vriend, Nicolaas J., 2007. "Schelling's spatial proximity model of segregation revisited," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 1-24, February.
    18. repec:mab:wpaper:23 is not listed on IDEAS
    19. Schwartz, Amy Ellen & Voicu, Ioan & Horn, Keren Mertens, 2014. "Do choice schools break the link between public schools and property values? Evidence from house prices in New York City," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 1-10.
    20. 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.
    21. repec:ces:ifodic:v:2:y:2004:i:4:p:14567723 is not listed on IDEAS
    22. repec:gam:jsusta:v:9:y:2017:i:6:p:1075-:d:102126 is not listed on IDEAS
    23. Louafi Bouzouina & Dominique Mignot, 2005. "Disparités de revenus à différentes échelles spatiales en France de 1985 à 2001," Post-Print halshs-00108437, HAL.
    24. Leonid V. Azarnert, 2008. "Involuntary Integration in Public Education, Fertility and Human Capital," Working Papers 2008-07, Bar-Ilan University, Department of Economics.
    25. Rainald Borck, 2008. "Central versus local education finance: a political economy approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(3), pages 338-352, June.

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