Education Equity and Intergenerational Mobility: Quasi-experimental Evidence From Court-ordered School Finance Reforms

Minghao Li
March 2019  [19-WP 589]

Starting from early seventies, court-ordered school finance reforms (SFRs) have fundamentally changed the landscape of primary and elementary education finance in the US. This paper employs SFRs as quasi-experiments to quantify the effects of education equity on intergenerational mobility within commuting zones. First, I use reduced form difference-in-difference analysis to show that 10 years of exposure to SFRs increases the average college attendance rate by about 5.2% for children with the lowest parent income. The effect of exposure to SFRs decreases with parent income and increases with the duration of exposure. Second, to directly model the causal pathways, I construct a measure for education inequity based on the association between school district education expenditure and median family income. Using exposure to SFRs as the instrumental variable, 2SLS analysis suggests that one standard deviation reduction in education inequality will cause the average college attendance rate to increase by 2.2% for children at the lower end of the parent income spectrum. Placing the magnitudes of these effects in context, I conclude that policies aimed at increasing education equity, such as SFRs, can substantially benefit poor children but they alone are not enough to overcome the high degree of existing inequalities.
Key words: public education finance, intergenerational mobility, school finance reforms, quasi-experiments

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