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School Finance Equalization Increases Intergenerational Mobility: Evidence from a Simulated-Instruments Approach

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  • Barbara Biasi

Abstract

This paper estimates the causal effect of equalizing revenues across public school districts on students’ intergenerational mobility. I exploit differences in exposure to equalization across seven cohorts of students in 20 US states, generated by 13 state-level school finance reforms passed between 1980 and 2004. Since these reforms create incentives for households to sort across districts and this sorting affects property values, post-reform revenues are endogenous to an extent that varies across states. I address this issue with a simulated instruments approach, which uses newly collected data on states’ funding formulas to simulate revenues in the absence of sorting. I find that equalization has a large effect on mobility of low-income students, with no significant changes for high-income students. Reductions in the gaps in inputs (such as the number of teachers) and in college attendance between low-income and high-income districts are likely channels behind this effect.

Suggested Citation

  • Barbara Biasi, 2019. "School Finance Equalization Increases Intergenerational Mobility: Evidence from a Simulated-Instruments Approach," NBER Working Papers 25600, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:25600
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    Cited by:

    1. Ferrando, Mery & Gille, Veronique, 2022. "Does the Identity of Leaders Matter for Education? Evidence from the First Black Governor in the US," Other publications TiSEM 1eaa8f31-44b5-4004-95a8-b, Tilburg University, School of Economics and Management.
    2. Cécile Bonneau, 2020. "The Concentration of investment in education in the US (1970-2018)," Working Papers halshs-02875965, HAL.
    3. Eric Brunner & Joshua Hyman & Andrew Ju, 2020. "School Finance Reforms, Teachers' Unions, and the Allocation of School Resources," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 473-489, July.
    4. Handy, Christopher & Shester, Katharine, 2020. "Accounting for Changes in Intergenerational Mobility," MPRA Paper 102425, University Library of Munich, Germany.
    5. Nathan Deutscher & Bhashkar Mazumder, 2023. "Measuring Intergenerational Income Mobility: A Synthesis of Approaches," Journal of Economic Literature, American Economic Association, vol. 61(3), pages 988-1036, September.
    6. Cécile Bonneau, 2020. "The Concentration of investment in education in the US (1970-2018)," World Inequality Lab Working Papers halshs-02875965, HAL.
    7. Brunner, Eric & Hoen, Ben & Hyman, Joshua, 2022. "School district revenue shocks, resource allocations, and student achievement: Evidence from the universe of U.S. wind energy installations," Journal of Public Economics, Elsevier, vol. 206(C).
    8. Mariana Laverde, 2022. "Distance to Schools and Equal Access in School Choice Systems," Boston College Working Papers in Economics 1046, Boston College Department of Economics.
    9. Marie Connolly & Catherine Haeck & Jean-William P. Laliberté, 2021. "Parental Education and the Rising Transmission of Income between Generations," NBER Chapters, in: Measuring Distribution and Mobility of Income and Wealth, pages 289-315, National Bureau of Economic Research, Inc.
    10. Eckert,Fabian & Kleineberg,Tatjana Karina, 2021. "Saving the American Dream ? Education Policies in Spatial General Equilibrium," Policy Research Working Paper Series 9574, The World Bank.
    11. Mariana Laverde, 2022. "Distance to Schools and Equal Access in School Choice Systems," Working Papers 2022-002, Human Capital and Economic Opportunity Working Group.

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    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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