School Finance Equalization Increases Intergenerational Mobility: Evidence from a Simulated-Instruments Approach

Barbara Biasi

No 25600, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper estimates the causal effect of equalizing revenues across public school districts on students’ intergenerational mobility. I exploit differences in exposure to equalization across seven cohorts of students in 20 US states, generated by 13 state-level school finance reforms passed between 1980 and 2004. Since these reforms create incentives for households to sort across districts and this sorting affects property values, post-reform revenues are endogenous to an extent that varies across states. I address this issue with a simulated instruments approach, which uses newly collected data on states’ funding formulas to simulate revenues in the absence of sorting. I find that equalization has a large effect on mobility of low-income students, with no significant changes for high-income students. Reductions in the gaps in inputs (such as the number of teachers) and in college attendance between low-income and high-income districts are likely channels behind this effect.

JEL-codes: I22 I24 J62 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (16)

Published as Barbara Biasi, "School Finance Equalization Increases Intergenerational Mobility." Journal of Labor Economics Volume 41, Number 1 January 2023

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