Educational Policy and Intergenerational Policy

In the United States, there is considerable variation in intergenerational mobility across states. We argue that educational policy and the distribution of public school spending across school districts is important to understand intergenerational mobility within the United States. We build a dynamic model in which districts vote over spending per pupil and school finance systems determine spending. We embed this model with median voting at the district level with a fairly standard Ben Porath model of human capital accumulation later in life. Our model can replicate the correlation between average public school spending per pupil and intergenerational mobility. Counterfactual simulations suggest that i) the distribution of public school spending across school districts plays an important role in explaining the correlation between average public school spending per pupil and rank-rank slope and ii) switching to full state funding in every state improves intergenerational mobility significantly and the negative relationship between intergenerational mobility and public school spending no longer exists. We conclude that educational policy is an important factor in explaining intergenerational mobility. (Copyright: Elsevier)