EDUCATION FINANCE REFORM: A DYNAMIC PERSPECTIVE

In: Journal of policy analysis and management: the journal of the Association for Public Policy Analysis and Management, Band 16, Heft 2, S. 67-84

Abstract

THE AUTHORS USE A DYNAMIC TIEBOUT MODEL TO ANALYZE THE CONSEQUENCES OF MOVING FROM A PURELY LOCAL SYSTEM OF EDUCATIONAL FINANCE TO A PURELY STATE SYSTEM IN WHICH EACH STUDENT RECEIVES THE SAME RESOURCES. WHILE MUCH OF THE EDUCATION FINANCE LITERATURE FOCUSES ON THE STATIC OR IMMEDIATE EFFECTS OF SUCH A CHANGE, THIS ANALYSIS STUDIES THE DYNAMIC EFFECTS. NUMERICAL SIMULATIONS FOR A CALIBRATED VERSION OF THIS MODEL INDICATE THAT THESE DYNAMIC EFFECTS ARE VERY IMPORTANT. COMPARING STEADY STATES, THE AUTHORS FIND THAT AGGREGATE WELFARE INCREASES ON THE ORDER OF 10 PERCENT FOLLOWING THE CONVERSION TO A STATE SYSTEM. THE KEY TO THIS WELFARE GAIN IS THAT A LOCAL SYSTEM YIELDS INEFFICIENTLY LOW INVESTMENT IN HUMAN CAPITAL OF CHILDREN FROM LOW-INCOME FAMILIES.