PUBLIC-EDUCATION AND INCOME-DISTRIBUTION - A DYNAMIC QUANTITATIVE-EVALUATION OF EDUCATION-FINANCE REFORM

Many states are implementing school-finance reforms which will have co mplex effects on income distribution, intergenerational income mobilit y, and welfare. This paper analyzes the static and dynamic effects of such reforms by constructing a dynamic general equilibrium model of pu blic-education provision and calibrating it using U.S. data. We examin e the consequences of a reform of a locally financed system to a state -financed system which equalizes expenditures per student across distr icts. We find that this policy increases both average income and the s hare of income spent on education. Steady-state welfare increases by 3 .2 percent of steady-state income.