Working Paper: NBER ID: w15915
Authors: Eric A. Hanushek; Kuzey Yilmaz
Abstract: An important element in considering school finance policies is that households are not passive but instead respond to policies. Household behavior is especially important in considering how households affect the spatial structure of metropolitan areas where different jurisdictions incorporate bundles of advantages and disadvantages. This paper adds richness to existing urban models by incorporating multiple workplace locations, alternative public services by jurisdiction (school qualities), and voter- determined school expenditure. In our general equilibrium model of residential location and community choice, households base optimizing decisions on commuting costs, school quality, and land rents. The resulting equilibrium has heterogeneous communities in terms of income and tastes for schools. This basic model is used to analyze a series of conventional policy experiments, including school district consolidation and district power utilization. The important conclusion within our range of simulations is that welfare falls for all families with the restrictions on choice that are implied by these approaches.
Keywords: School Finance; Household Location; Metropolitan Areas; Tiebout Model; General Equilibrium
JEL Codes: H4; I2; R2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| household behavior (D10) | spatial structure of metropolitan areas (R12) |
| school district consolidation or power equalization policies (H77) | welfare for all families (I38) |
| full state funding (H79) | overall achievement for all students (I24) |
| school finance policies (I22) | housing rents and support for schools (I22) |
| restrictions on choice (D10) | adjustments in housing rents and support for schools (R28) |
| commuting costs, school quality, land rents (R21) | household location decisions (R20) |