The Great Recession, Fiscal Federalism and the Consequences for Cross-District Spending Inequality

47 Pages Posted: 7 Mar 2019

See all articles by Kenneth Shores

Kenneth Shores

Pennsylvania State University

Matthew Steinberg

University of Pennsylvania - Graduate School of Education

Date Written: January 28, 2019

Abstract

We examine the correlates of district spending and revenue losses following the onset of the Great Recession and the role of fiscal federalism in mitigating these losses. We estimate whether spending and revenue declines were driven primarily by local labor market conditions or the degree of state fiscal centralization. Utilizing population level data for all public-school districts in the continental United States and a difference-in-differences strategy that models pre-recession resource trends, we find that local labor market conditions explain district spending loss in the wake of the Great Recession; in contrast, the degree of centralization in a state’s education finance system is uncorrelated with declines in total district spending. Resource poor districts located in states with greater state fiscal centralization were ill-equipped to offset district spending loss, and federal fiscal stimulus did little to mitigate — and, in some cases, exacerbated — differential declines in spending resulting from local labor market shocks. These findings highlight the potentially unintended role that fiscal federalism might play in widening district spending inequality in the wake of recessionary events.

Keywords: Great Recession; Fiscal Federalism; Educational Spending; Educational Resources

Suggested Citation

Shores, Kenneth and Steinberg, Matthew, The Great Recession, Fiscal Federalism and the Consequences for Cross-District Spending Inequality (January 28, 2019). Available at SSRN: https://ssrn.com/abstract=3335843 or http://dx.doi.org/10.2139/ssrn.3335843

Kenneth Shores (Contact Author)

Pennsylvania State University ( email )

Health and Human Development
University Park, PA 16802
United States
6505804655 (Phone)

Matthew Steinberg

University of Pennsylvania - Graduate School of Education ( email )

3700 Walnut Street
Philadelphia, PA 19104
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
38
Abstract Views
246
PlumX Metrics