Inequality and Education Funding: Theory and Evidence from the U.S. School Districts
37 Pages Posted: 11 Dec 2010
Date Written: September 1, 2010
We investigate the relationship between inequality and education funding in a model of probabilistic voting over public education spending where the private option is available. A change in inequality can have opposite effects at different income levels: higher inequality decreases public spending per student and increases enrollment in public schools in poor economies, while the opposite holds in the rich ones. A change in the tax base can also have non-monotonic effects. We also study the implications of different voting participation across income groups. The predictions of the model are supported by U.S. school district-level data.
Keywords: Education funding, Inequality, Political Economy
JEL Classification: D72, H42, I21, I22
Suggested Citation: Suggested Citation