Income Distribution and Public Education: A Dynamic Quantitative Evaluation of School Finance Reform

44 Pages Posted: 13 Jul 2000 Last revised: 7 May 2021

See all articles by Raquel Fernández

Raquel Fernández

New York University - Leonard N. Stern School of Business, Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Richard Rogerson

Arizona State University (ASU) - Economics Department; National Bureau of Economic Research (NBER); Princeton University - Princeton School of Public and International Affairs

Date Written: October 1994

Abstract

Many states have or are considering implementing school finance reforms aimed at lessening inequality in the provision of public education across communities. These reforms will tend to have complicated aggregate effects on income distribution, intergenerational income mobility, and welfare. In order to analyze the potential effects of such reforms, this paper constructs a dynamic general equilibrium model of public education provision, calibrates it using US data, and examines the quantitative effects of a major school finance reform. The policy reform examined is a change from a system of pure local finance to one in which all funding is done at the federal level and expenditures per student are equal across communities. We find that this policy increases average income and total spending on education as a fraction of income. Moreover, there are large welfare gains associated with this policy; steady-state welfare increases by 3.2% of steady-state income.

Suggested Citation

Fernández, Raquel and Rogerson, Richard, Income Distribution and Public Education: A Dynamic Quantitative Evaluation of School Finance Reform (October 1994). NBER Working Paper No. w4883, Available at SSRN: https://ssrn.com/abstract=226505

Raquel Fernández (Contact Author)

New York University - Leonard N. Stern School of Business, Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

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Richard Rogerson

Arizona State University (ASU) - Economics Department ( email )

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National Bureau of Economic Research (NBER)

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Princeton University - Princeton School of Public and International Affairs ( email )

Princeton University
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