The Finance-Education Nexus: Educational Consequences of US Interstate Bank Branching Deregulation

Xi Yang () and Jian Zou ()
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Xi Yang: University of North Texas
Jian Zou: Cornell University

No 18514, IZA Discussion Papers from IZA Network @ LISER

Abstract: This paper studies the impact of US interstate bank branching deregulation on school finance and student achievement, leveraging the deregulation as a state tax revenue shock. Total revenue and expenditure increase following the deregulation. The revenue increase stems mainly from higher state aid, with spending gains concentrated in capital outlays. Deregulation subsequently improves student achievement, with no distributional effects evident across students' ability, race, or free lunch status. The findings highlight the spillover benefits of a centralized school finance system in channeling positive tax revenue shocks into public education funding and human capital formation.

Keywords: banking deregulation; school finance system; student achievement (search for similar items in EconPapers)
JEL-codes: G21 G28 H75 I21 I22 (search for similar items in EconPapers)
Date: 2026-04
New Economics Papers: this item is included in nep-edu and nep-fdg
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