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The Political Economy of School Finance Systems with Endogenous State and Local Tax Policies

Author

Listed:
  • Stephen Calabrese
  • Dennis Epple
  • Richard Romano

Abstract

Beginning in the 1970’s, many state courts declared the widespread inequality in education spending across schools to violate their state’s constitution. Funding systems then emerged providing differing approaches to state and local support of education. We develop a theoretical framework and characterize outcomes under alternative systems. Our framework is distinctive in having voting over policies in both state and local elections. We also develop a calibrated computational model to compare equilibrium outcomes under the alternative school finance systems and to examine across state differences in expenditures. The model predicts that voters prefer systems with mixed state and local finance with designs mirroring those observed in practice.

Suggested Citation

  • Stephen Calabrese & Dennis Epple & Richard Romano, 2024. "The Political Economy of School Finance Systems with Endogenous State and Local Tax Policies," NBER Working Papers 33212, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33212
    Note: ED PE POL
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    More about this item

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H19 - Public Economics - - Structure and Scope of Government - - - Other
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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