The impact of intergovernmental grants-in-aid on public school expenditure under the segregated school system

Se-Koo Rhee

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: This dissertation investigated the fiscal behavior of local public school districts under the segregated schools system in Maryland with the emphasis on the relative response of school expenditure to intergovernmental grants-in-aid between black and white schools. The median voter model was employed to derive theoretical demand specifications for both no-nonresidential-property-tax-shifting and partial-shifting assumptions. The theoretical model derived here is unique in the sense that inter-racial factors are included to determine the demand for education in black and white schools, since the provision of public education services was decided simultaneously by the median voter who was presumed to be white;A pooled cross-section and time series data set from 1929 through 1955 was utilized for empirical estimates of both theoretical models and ad hoc adjusted models. The methods of ordinary least squares and nonlinear least squares were used to obtain unbiased estimates for both no tax shifting and partial tax shifting models, respectively. The simulation of the effect of nonexistence of government policy (grants) was also performed;The results showed that the expenditure or demand for education in black school districts was much more responsive to intergovernmental grants than in white school districts. Also, the ratio of per pupil expenditure between black and white was one-half in 1929, but almost one in 1955. In addition, simulation results showed that grants had a greater effect on spending for black schools than for white schools. Hence, the equalization of expenditure levels or the reduction of the gap in economic and social well-being between blacks and whites could have been achieved much faster had there been a way to allocate more of available state and federal grants-in-aid to black schools so as to stimulate the voter's spending on black schools.

Date: 1996-01-01
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