School Finance Equalization Increases Intergenerational Mobility
88 Pages Posted: 3 Oct 2016 Last revised: 21 Feb 2019
Date Written: February 19, 2019
This paper estimates the causal effect of equalizing revenues across public school districts on students' intergenerational mobility, using variation from 13 school finance reforms passed in 20 US states between 1986 and 2004.
Since households sort in response to each reform, post-reform revenues are endogenous to an extent that varies across states depending on the funding formula.
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, especially for low-income students. I provide suggestive evidence that this effect acts through a reduction in the gap in inputs (such as the number of teachers) and in college attendance between low-income and high-income districts.
Keywords: School Finance, Education Reform, Equality of Opportunity, Intergenerational Mobility
JEL Classification: I22, I24, J62
Suggested Citation: Suggested Citation