School Finance Equalization Increases Intergenerational Mobility
99 Pages Posted: 3 Oct 2016 Last revised: 22 Jun 2019
Date Written: June 17, 2019
This paper estimates the causal effect of equalizing revenues across public school districts on students’ intergenerational mobility. I exploit differences in exposure to equalization across seven cohorts of students in 20 US states, generated by 13 school finance reforms passed between 1980 and 2004. Since these reforms create incentives for households to sort across districts and this sorting affects property values, post-reform revenues are endoge- nous to an extent that varies across states. I address this issue with a simulated-instruments approach, which uses newly collected data on states’ funding formulas to simulate rev- enues in the absence of sorting. I find that equalization has a large effect on mobility of low-income students, with no significant changes for high-income students. Reductions in the gaps in inputs (such as the number of teachers) and in college attendance between low-income and high-income districts are likely channels behind this effect.
Keywords: School Finance, Intergenerational Mobility, Simulated Instruments
JEL Classification: I22, I24, J62
Suggested Citation: Suggested Citation