School Finance Reform: Assessing General Equilibrium Effects

46 Pages Posted: 24 Oct 2007 Last revised: 16 Dec 2022

See all articles by Dennis Epple

Dennis Epple

Carnegie Mellon University; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Maria Marta Ferreyra

Carnegie Mellon University - David A. Tepper School of Business

Date Written: October 2007

Abstract

In 1994 the state of Michigan implemented one of the most comprehensive school finance reforms undertaken to date in any of the states. Understanding the effects of the reform is thus of value in informing other potential reform initiatives. In addition, the reform and associated changes in the economic environment provide an opportunity to assess whether a simple general equilibrium model can be of value in framing the study of such reform initiatives. In this paper, we present and use such a model to derive predictions about the effects of the reform on housing prices and neighborhood demographic compositions. Broadly, our analysis implies that the effects of the reform and changes in the economic environment are likely to have been reflected primarily in housing prices and only modestly on neighborhood demographics. We find that evidence for the Detroit metropolitan area from the decade encompassing the reform is largely consistent with the predictions of the model.

Suggested Citation

Epple, Dennis and Ferreyra, Maria Marta, School Finance Reform: Assessing General Equilibrium Effects (October 2007). NBER Working Paper No. w13524, Available at SSRN: https://ssrn.com/abstract=1024128

Dennis Epple (Contact Author)

Carnegie Mellon University ( email )

Tepper School of Business
Pittsburgh, PA 15213-3890
United States
412-268-1536 (Phone)
412-268-7357 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Maria Marta Ferreyra

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

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