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Income Distribution and Public Education: A Dynamic Quantitative Evaluation of School Finance Reform

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  • Raquel Fernandez
  • Richard Rogerson

Abstract

Many states have or are considering implementing school finance reforms aimed at lessening inequality in the provision of public education across communities. These reforms will tend to have complicated aggregate effects on income distribution, intergenerational income mobility, and welfare. In order to analyze the potential effects of such reforms, this paper constructs a dynamic general equilibrium model of public education provision, calibrates it using US data, and examines the quantitative effects of a major school finance reform. The policy reform examined is a change from a system of pure local finance to one in which all funding is done at the federal level and expenditures per student are equal across communities. We find that this policy increases average income and total spending on education as a fraction of income. Moreover, there are large welfare gains associated with this policy; steady-state welfare increases by 3.2% of steady-state income.

Suggested Citation

  • Raquel Fernandez & Richard Rogerson, 1994. "Income Distribution and Public Education: A Dynamic Quantitative Evaluation of School Finance Reform," NBER Working Papers 4883, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4883
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    Cited by:

    1. Jhorland Ayala Garcia & Shirly Marrugo Llorente & Bernardo Saray Ricardo, 2011. "Antecedentes familiares y rendimiento académico en los colegios oficiales de Cartagena," Revista Economía y Región, Universidad Tecnológica de Bolívar, vol. 5(2), pages 43-85, December.
    2. Fernandez, Raquel, 1997. "Odd versus even: comparative statics in multicommunity models," Journal of Public Economics, Elsevier, vol. 65(2), pages 177-192, August.
    3. Bolton, Patrick & Roland, Gerard & Spolaore, Enrico, 1996. "Economic theories of the break-up and integration of nations," European Economic Review, Elsevier, vol. 40(3-5), pages 697-705, April.
    4. Robert Manwaring & Steven Sheffrin, 1997. "Litigation, School Finance Reform, and Aggregate Educational Spending," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(2), pages 107-127, May.
    5. Iyigun, Murat F, 1999. "Public Education and Intergenerational Economic Mobility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 697-710, August.
    6. Juan A. Rojas, 2004. "On the Interaction between Education and Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 932-957, October.
    7. Roland Benabou, 1996. "Unequal Societies," NBER Working Papers 5583, National Bureau of Economic Research, Inc.
    8. Piketty, Thomas, 2000. "Theories of persistent inequality and intergenerational mobility," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 8, pages 429-476, Elsevier.
    9. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1996. "Are consumption taxes really better than income taxes?," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 475-503, June.
    10. Stephen M. Calabrese, 2007. "Majority Voting over Publicly Provided Goods, Redistribution, and Income Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(2), pages 319-334, April.
    11. Jorge Soares, "undated". "Altruism and Self-interest in a Political Economy of Public Education," Working Papers 130, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

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    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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