Working Paper: NBER ID: w4158
Authors: Raquel Fernandez; Richard Rogerson
Abstract: This paper analyzes within the context of a multicommunity model the effects of several policies that affect the financing of public education. The key features of the model are: (I) individuals differ with respect to income, (ii) individuals choose in which community to reside, (iii) communities are characterized by a proportional tax on income and a quality of public education, and (iv) a community's tax rate is chosen by majority vote. We examine three types of policies: subsidies for residency of specific income groups in particular communities, ceilings or floors on community level educational spending, and income redistribution. In each case we examine the consequences of these policies for both welfare and the quality of education across communities. We identify several policies which make all individuals better off and increase the quality of education in all communities.
Keywords: Public Education; Income Distribution; Education Finance; Welfare Economics
JEL Codes: I20; H75
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capping the quality level in wealthier communities (I24) | overall welfare (I31) |
| mandating higher quality education in poorer communities (I24) | welfare (I38) |
| subsidies promoting middle-income residency in poorer communities (R38) | educational quality (I21) |
| subsidies encouraging middle-income individuals to reside in wealthier communities (R28) | welfare (I38) |
| redistributive tax policy (H23) | welfare and educational quality (I39) |
| taxing all wealthiest individuals and redistributing to the poor (H23) | welfare and educational inequality (I24) |