An Empirical Framework for Large-Scale Policy Analysis, with an Application to School Finance Reform in Michigan

Abstract

In this paper I develop an empirical framework for the analysis of large-scale policies, and apply it to study the effects of school finance reform on the Detroit metropolitan area. Exploiting the school finance reform in Michigan 1994, I estimate a general equilibrium model of multiple jurisdictions with 1990 data from Detroit, predict the 2000 equilibrium, and compare this prediction with 2000 data to validate the model. I conduct counterfactual simulations using the estimates. According to my analysis, revenue-based reforms that ensure spending equity or adequacy have little impact on household demographics or school quality in Detroit.