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

Raquel Fernandez () and Richard Rogerson ()

No 4883, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: I22 H42 (search for similar items in EconPapers)
Date: 1994-10
Note: PE
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