School Finance Induced Migration and Stratification Patterns: The Impact of Private School Vouchers

TLDR

The model’s ability to capture varying degrees of imperfect residential stratification makes it well suited to study migration forces induced by school finance reform, though its complexity limits analytic tractability. The paper introduces a general equilibrium model of public school finance that incorporates multiple districts, neighborhood housing quality, mandatory public school admission, private school clubs, an educational production process dependent on per‑pupil spending and peer quality, and peer quality correlated with household socioeconomic status. A computational counterpart of the model is developed, calibrated to data, and used for policy experiments. Policy experiments show that vouchers tend to benefit public schools in poor communities while harming those in wealthy communities due to migration patterns.

Abstract

This paper introduces a general equilibrium model of public school finance that includes: (i) multiple school districts that finance local public schools via property taxes set by majority vote; (ii) multiple neighborhoods within school districts where each neighborhood is characterized by a quality level of housing; (iii) local public schools that are obligated to admit all interested students who reside within the school district; (iv) private schools that function as clubs of parents who share the cost of the private school equally and who can choose to exclude others; (v) an educational production process that depends on both per pupil spending and average peer quality within the school; and (vi) individual peer quality levels that are correlated with the socioeconomic status of households. Since it allows for various degrees of imperfect stratification of residents across communities, the model is well suited for investigating empirically relevant migration forces induced by school finance reform proposals. The abstract model itself, however, is too complex to yield many analytic results. A computational counterpart to the model isnb therefore developed, calibrated to data, and utilized for policy experiments. In particular, the impact of vouchers in the context of different types of prevoucher educational finance systems is investigated, and it is found that migration patterns in general would cause vouchers to benefit public schools in poor communities while hurting public schools in wealthy communities.