Inequality in Public School Spending Across Space and Time

Christopher Biolsi, Steven Craig, Amrita Dhar () and Bent Sorensen

Review of Economic Dynamics, 2022, vol. 46, 244-279

Abstract: This paper takes a novel time series perspective on the financing of K-12 schooling. About half of school spending is financed by state government aid to local districts, and because state aid is generally income conditioned, it acts as a mechanism for risk sharing between school districts. We show that temporal inequality, due to state and local business cycles, is prevalent across the income distribution. We estimate a model of local revenue and state aid, and its allocation across districts, and use the parameters to simulate impulse response functions. We find that state aid provides risk sharing for local shocks, although slow speed of adjustment results in temporal inequality. There is little risk sharing for statewide income shocks, and the risk from such shocks to school spending is more severe in low-income districts because of their greater reliance on state aid. (Copyright: Elsevier)

Keywords: Local School Finance; Fiscal Federalism; Education Inequality; Risk Sharing between school districts (search for similar items in EconPapers)
JEL-codes: H72 H77 I22 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1016/j.red.2021.09.004

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