Working Paper: CEPR ID: DP3358
Authors: Harris Selod; Yves Zenou
Abstract: Black and white families are heterogenous both in income and ability and simultaneously decide where to locate in the city and which school (private or public) to send their children. We show that, in equilibrium, despite the tuition fees imposed by whites, some black pupils may attend the private school. In fact three different equilibrium regimes can occur: either all, some, or none of the black pupils attend the private school. In all three cases, white families reside close to the private school attended by their children whereas black families locate further away. This market solution is shown not to be optimal, one of the reasons being that whites overprice education in order to limit black attendance at the private school, protecting their children from negative human capital externalities. Three types of education policies publicly financed by an income tax are then considered: transportation subsidies, private-school vouchers and public school spending. The efficiency of such policies depends on the fee-setting behaviour of whites, which strongly varies from one policy to another.
Keywords: Busing; Education; Externalities; Fees; Urban Segregation; Vouchers
JEL Codes: H20; I20; R14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tuition fees set by white families (I22) | number of black pupils who can afford to attend private schools (I24) |
| higher fees deter black pupils from attending (I22) | complete segregation, partial integration, complete integration (H77) |
| fee-setting behavior of white families (D19) | market solution (high fees to limit black attendance) (D49) |
| market solution (high fees to limit black attendance) (D49) | suboptimal allocation of educational resources (I24) |
| educational policies (transportation subsidies, private school vouchers, public school spending) (H52) | integration outcomes (F02) |
| policy design (G52) | school choice and integration outcomes (I24) |