On equalizing school expenditures

A conflict between efficiency and equity exists in the provision of public education. We examine this conflict and consider a compromise approach to school finance, "district power equalization" (DPE). DPE has never been implemented in its "pure" form, which would require raising tax prices in wealthy districts as well as lowering them in poorer districts. We present simulations of districts' expenditure per pupil under two DPE plans in three states. We find that a "pure" DPE plan would reduce variance in expenditure among districts and have sometimes dramatic consequences for the rank ordering of districts within a state by expenditure per pupil.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/28852/1/0000687.pd

Municipal overburden: an empirical analysis

The municipal overburden hypothesis asserts the existence of a causal relationship between high levels of non-school municipal expenditure or tax rates and low levels of school spending. We estimate demand for expenditure on education using a median voter model. The hypothesis is tested by including in the estimating equation several versions of a variable representing municipal overburden. We find no evidence in support of the hypothesis.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/26403/1/0000490.pd

Estimating permanent and transitory income elasticities of education spending from panel data

We use a twenty-one year panel of data to examine the role of past income and aid, and expectations of future income, in regressions explaining state and local education spending. We show that simple estimates of the elasticity of spending with respect to financial resources are not robust to specification changes because the variables are non-stationary over time, causing inconsistent estimation of model parameters. Estimation in first differences (or equivalently, in growth rates) solves the time-series problems and produces robust estimates of the model's parameters. We then show that current spending by states responds to changes in expected future income. This explains why using fixed effects in simpler models reduces estimated income elasticities; fixed effects partially capture permanent income effects on spending. Estimates of lagged income are significant when used in models that do not explicitly model the expectations process, but present and past aid both have no effect on education spending. Models with structural assumptions about expected income produce estimates very similar to simpler models which include lagged information on income as a control variable. We conclude with recommendations for estimating models when only cross-section data or only short panels are available.H72 I22 C23 Education spending Panel data Income