School Finance Equalization Increases Intergenerational Mobility

88 Pages Posted: 3 Oct 2016 Last revised: 21 Feb 2019

Date Written: February 19, 2019

Abstract

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

Biasi, Barbara, School Finance Equalization Increases Intergenerational Mobility (February 19, 2019). Available at SSRN: https://ssrn.com/abstract=2846490 or http://dx.doi.org/10.2139/ssrn.2846490

Barbara Biasi (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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