Public Education and Income Distribution: A Dynamic Quantitative Evaluation of Education--Finance

Abstract

Many states are implementing school-finance reforms which will have complex effects on income distribution, intergenerational income mobility, and welfare. This paper analyzes the static and dynamic effects of such reforms by constructing a dynamic general equilibrium model of public-education provision and calibrating it using U.S. data. The authors examine the consequences of a reform of a locally financed system to a state-financed system which equalizes expenditures per student across districts. They find that this policy increases both average income and the share of income spent on education. Steady-state welfare increases by 3.2 percent of steady-state income. Copyright 1998 by American Economic Association.

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