NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

School Finance Reform: Assessing General Equilibrium Effects

Dennis N. Epple, Maria Marta Ferreyra

NBER Working Paper No. 13524
Issued in October 2007
NBER Program(s):   CH   ED   PE

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.

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Document Object Identifier (DOI): 10.3386/w13524

Published: Epple, Dennis & Ferreyra, Maria Marta, 2008. "School finance reform: Assessing general equilibrium effects," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1326-1351, June.

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