ecn152-lecture12

ecn152-lecture12 - Economics152: EconomicsofEducation...

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Economics 152:   Economics of Education Professor Scott Carrell Lecture 13:  School Finance
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Overview • Local school finance:  the Tiebout Model – Benchmark model in school finance – Gives conditions under which complete local  funding of education (schools) is efficient • Centralized school finance – School finance equalization (state) – Intergovernmental grants (state, federal   local)
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Public Goods • Pure public goods have two characteristics Non-rival in consumption : one person’s  consumption does not preclude another person’s  consumption Non-excludable :  even if one person wanted to  deny another person access to the good, he could  not • Classic examples of public goods: – National defense, public parks
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Education as a Public Good • Is education non-rival in consumption? – Low inputs (e.g., large class sizes) can lower the  quality of classroom instruction • Is education non-excludable? Public  education is non-excludable (access for all) Private  education is excludable (admission not  guaranteed) • Thus, education is an “impure” public good
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Ed as a Public Good:  Evidence • Most students attend public schools – 90% of elementary and secondary students  – 75% of college students • Most education spending is by the government – Largest fraction of state and local spending
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Tiebout Model:  Idea • When is local provision of schools efficient? Efficiency :  no way to make one person better off  without making another person worse off • Intuition:   – Buy a package of public goods (including schools)  through choice of location – Re-locate until can no longer make oneself better  off – Ability to move gives public goods providers (e.g.,  teachers) incentives to be productive
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Tiebout Model:  Assumptions • Assumption 1:
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ecn152-lecture12 - Economics152: EconomicsofEducation...

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