Abstracts Economics

Essays on financing reform and the provision of local public education

by Li Li

This dissertation investigates the provision of local public education from both theoretical and empirical aspects. In the theoretical sections, the existence of Pareto-improving reform (to redistribute education resources away from the rich community and toward the poor community) is examined under the current public education financing system. In the empirical section, the state financing system on public education in the state of Colorado is tested. Chapter 1 introduces the importance and motivation of my research topic. Chapter 2 directly follows the theoretical framework in Fernandez and Rogerson (1996). As far as I know, they are the first to examine the provision of public education under a multi-community and multi-income-group model and discuss reforms which might be Pareto-improving. By adding additional assumptions on population distribution and individuals’ preferences, I analytically show that under a two-community and three-income-group model, when local public education is financed by an income tax, the reform “to redistribute a fraction of education expenditures away from the rich community toward the poor community” is Pareto-improving. Since public education is mainly financed by a property tax, a general housing market with an upward sloping supply curve is introduced in Chapter 3. Simulations show that when local public education is funded by a housing property tax, the reform posed in Chapter 2 may still work. The redistributive fraction chosen by the state government determines whether the reform is Pareto-improving or not. In the empirical section, Chapter 4, I develop four regression models to examine the effects of the state financing policy on public education in Colorado. The results show that the Colorado state government is reducing disparity in per student spending across school districts. However, the current policy is not potentially Pareto-improving according to the theory developed in Chapter 2. Thus, policy suggestions are made. Chapter 5 summarizes and concludes my dissertation. Advisors/Committee Members: Cutler, Harvey (advisor), Pena, Anita Alves (advisor), Mushinski, David (committee member), Kroll, Stephan (committee member).