Housing Markets and Residential Segregation: Impacts of the Michigan School Finance Reform on Inter- and Intra-District Sorting

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractLocal financing of public schools in the United States leads to a bundling of two distinct choices -residential choice and school choice -and has been argued to increase the degree of socioeconomic segregation across school districts. A school finance reform, aimed at equalization of school finances, can in principle weaken this link between housing choice and choice of schools. In this paper, we study the impacts of the Michigan school finance reform of 1994 (Proposal A) on spatial segregation. The reform was a state initiative intended to equalize per-pupil expenditures between Michigan school districts and reduce the role of local financing. We find that Proposal A was responsible for increases in the value of housing stock in the lowest-spending school districts, and for improvements in several socioeconomic indicators in these districts, implying a decline in neighborhood sorting. We also find that the reform affected dispersion of incomes and educational attainment within school districts, increasing within-district heterogeneity in the lowest-spending school districts, while decreasing the same in the highest-spending districts. However, there is continued high demand for residence in the highest-spending communities, suggesting the importance of neighborhood peer effects ("local" social capital) and implying that even a comprehensive government aid program can fail to make a large impact on residential segregation.

Does Money Matter in the Long Run? Effects of School Spending on Educational Attainment

“…However, several studies show that there was no major resorting across districts or changes in district demographics in Michigan due to Proposal A (Epple andFerreyra 2008, Courant andLoeb 1997). Chakrabarti and Roy (2015) find resorting led to changes in district characteristics, but these effects were minor compared to the demographic and economic changes Michigan experienced during this period. 13 Including a district-specific linear cohort trend vastly reduces first stage power, and nearly triples the size of the standard errors in my main results.…”

Local Policy Choice: Theory and Empirics

“…The latter eects are larger for states where localities maintained a high level of discretion over local taxes. Chakrabarti and Roy (2015) looks at the eects of the Michigan 1994 reform, which basically was a foundation system that constrained future spending increases by high spending districts and provided signicant increases in spending to the lowest spending districts, signicantly reducing the gap in spending. The reform led to an theoretical analysis of the dierent equalization schemes in a Tiebout model.…”