Working Paper: NBER ID: w25600
Authors: Barbara Biasi
Abstract: This paper estimates the causal effect of equalizing revenues across public school districts on students’ intergenerational mobility. I exploit differences in exposure to equalization across seven cohorts of students in 20 US states, generated by 13 state-level school finance reforms passed between 1980 and 2004. Since these reforms create incentives for households to sort across districts and this sorting affects property values, post-reform revenues are endogenous to an extent that varies across states. I address this issue with a simulated instruments approach, which uses newly collected data on states’ funding formulas to simulate revenues in the absence of sorting. I find that equalization has a large effect on mobility of low-income students, with no significant changes for high-income students. Reductions in the gaps in inputs (such as the number of teachers) and in college attendance between low-income and high-income districts are likely channels behind this effect.
Keywords: School Finance; Intergenerational Mobility; Equalization; Public Policy
JEL Codes: I22; I24; J62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| School finance equalization (H79) | intergenerational mobility (J62) |
| Reduction in revenue inequality (D31) | increase in income rank of low-income students (I24) |
| Reduction in revenue inequality (D31) | increase in income of low-income students (I24) |
| Early exposure to equalization (I24) | increase in income rank of low-income students (I24) |
| Exposure to equalization during high school (I24) | increase in income rank of low-income students (I24) |
| School finance equalization is most effective in states with higher income inequality and segregation (I24) | increase in intergenerational mobility (J62) |
| Average reform increases mobility of children from families in the 10th percentile (I24) | increase in mobility of children from families in the 10th percentile (J62) |