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The Economics of International Differences in Educational Achievement

  • Eric Hanushek

    ()

    (Hoover Institute, Stanford University)

  • Ludger Woessmann

    (University of Warwick
    University of Munich)

An important element in considering school finance policies is that households are not passive but instead respond to policies. Household behavior is especially important in considering how households affect the spatial structure of metropolitan areas where different jurisdictions incorporate bundles of advantages and disadvantages. This paper adds richness to existing urban models by incorporating multiple workplace locations, alternative public services by jurisdiction (school qualities), and voter-determined school expenditure. In our general equilibrium model of residential location and community choice, households base optimizing decisions on commuting costs, school quality, and land rents. The resulting equilibrium has heterogeneous communities in terms of income and tastes for schools. This basic model is used to analyze a series of conventional policy experiments, including school district consolidation and district power utilization. The important conclusion within our range of simulations is that welfare falls for all families with the restrictions on choice that are implied by these approaches.

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Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 09-013.

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Date of creation: Apr 2010
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Handle: RePEc:sip:dpaper:09-013
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