SCHOOL-FINANCE REFORM AND PRIVATE SCHOOL ENROLLMENT - EVIDENCE FROM CALIFORNIA

This paper uses the school finance reforms in California in the 1970s to examine whether the constraints such reforms impose on school distr icts lead to switching to private schools. Misspecifications of demand in previous work have led to understatement of reform effects. An emp irical model of schooling share equations is derived from a discrete c hoice framework. Large biases are shown to result from failure to acco unt for heterogeneity of demanders and school-district-specific fixed effects. Simulations indicate that the changes in public provision pot entially resulting from reform explain a sizeable portion of the growt h in the private school share. (C) 1998 Academic Press.