All School Finance Equalizations are Not Created Equal

School finance equalization has probably affected American schools more than any other reform of the last 30 years. Understanding it is a prerequisite for making optimal social investments in human capital. Yet, it is poorly understood. In this paper I explain why: it differs from conventional redis...

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Bibliographic Details
Published in:The Quarterly journal of economics 2001-11, Vol.116 (4), p.1189-1231
Main Author: Hoxby, Caroline M.
Format: Article
Language:English
Subjects:
Censuses
Consumer spending
Economic theory
Equalization
Finance
Income taxes
Mathematical models
Private schools
Property taxes
Property values
School attendance
School finance
Spending
State income tax
Studies
Tax rates
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Summary:School finance equalization has probably affected American schools more than any other reform of the last 30 years. Understanding it is a prerequisite for making optimal social investments in human capital. Yet, it is poorly understood. In this paper I explain why: it differs from conventional redistribution because it is based on property values, which are endogenous to schools' productivity, taste for education, and the school finance system itself. I characterize equalization schemes and show why some "level down" and others "level up." Schemes that strongly level down have unintended consequences: even poor districts can end up worse off. I also show how school finance equalization affects property prices, private school attendance, and student achievement.
ISSN:0033-5533
1531-4650
DOI:10.1162/003355301753265552