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The Finance-Education Nexus: Educational Consequences of US Interstate Bank Branching Deregulation

Author

Listed:
  • Yang, Xi

    (University of North Texas)

  • Zou, Jian

    (Cornell University)

Abstract

This paper studies the impact of US interstate bank branching deregulation on school finance and student achievement, leveraging the deregulation as a state tax revenue shock. Total revenue and expenditure increase following the deregulation. The revenue increase stems mainly from higher state aid, with spending gains concentrated in capital outlays. Deregulation subsequently improves student achievement, with no distributional effects evident across students' ability, race, or free lunch status. The findings highlight the spillover benefits of a centralized school finance system in channeling positive tax revenue shocks into public education funding and human capital formation.

Suggested Citation

  • Yang, Xi & Zou, Jian, 2026. "The Finance-Education Nexus: Educational Consequences of US Interstate Bank Branching Deregulation," IZA Discussion Papers 18514, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18514
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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