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Inequality and Education Funding Theory and Evidence from the U.S. School Districts

Calin Arcalean and Ioana Schiopu ()

No 2010-009, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: We investigate the relationship between inequality and education funding in a model of probabilistic voting over public education spending where the private option is available. A change in inequality can have opposite effects at different income levels: higher inequality decreases public spending per student and increases enrollment in public schools in poor economies, while the opposite holds in the rich ones. A change in the tax base can also have non-monotonic effects. We also study the implications of different voting participation across income groups. The predictions of the model are supported by U.S. school district-level data.

Pages: 37 pages
Date: 2010-09
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