Income Distribution, Communities, and the Quality of Public Education

Raquel Fernandez and Richard Rogerson

The Quarterly Journal of Economics, 1996, vol. 111, issue 1, 135-164

Abstract: This paper develops a multicommunity model and analyzes policies that affect spending on public education and its distribution across communities. We find that policies that on net increase the fraction of the (relatively) wealthiest residents in the poorest community are welfare enhancing; policies that decrease this fraction can make all worse off. Appropriately financed policies to (i) redistribute income toward the poorest, (ii) increase spending on education in the poorest community, and (iii) make the poorest community more attractive to relatively wealthier individuals, produce chain reactions in which the quality of education increases and tax rates fall in all communities.

Date: 1996
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