who would be left behind by enhanced private school choice abstract debate over school choice is central to many discussions of public elementary and secondary educational reform the debate has largely focused on conceptual arguments rather than careful empirical research that attempts to sort out competing claims an important unresolved issue is the question of cream skimming who will move and who will be left behind as a result of enhanced school choice this paper uses data from the national educational longitudinal survey nels 88 to estimate a model of public private school choice which is used to simulate who would likely leave public schools as a result of enhanced private school choice building upon the work of k train et al 1987 the review of economics and statistics 69 383 391 we employ a probit model with latent explanatory variables to account for the unobserved attitudes of parents and their children regarding education the model allows us to consider such latent interests in education as well as the academic and socioeconomic characteristics of those students who would likely switch to private schools our findings indicate that concerns about bright flight or academic cream skimming in response to increased school choice appear to be overstated however we estimate that there would be substantially more economic and racial segregation of students as movers tend to be white and have higher incomes than those who are left behind

school finance reform and private school enrollment evidence from california abstract abstract this paper uses the school finance reforms in california in the 1970s to examine whether the constraints such reforms impose on school districts lead to switching to private schools misspecifications of demand in previous work have led to understatement of reform effects an empirical model of schooling share equations is derived from a discrete choice framework large biases are shown to result from failure to account for heterogeneity of demanders and school district specific fixed effects simulations indicate that the changes in public provision potentially resulting from reform explain a sizeable portion of the growth in the private school share

the many faces of tiebout bias in local education demand parameter estimates abstract tiebout sorting can occasion bias in public service demand parameter estimates in at least three distinct ways this paper identifies each of these types of tiebout bias and provides estimates of each of their magnitudes first the empirical results suggest that the type of tiebout bias first identified by goldstein and pauly is positive and large but that their proposed method of correcting for that bias substantially overestimates its magnitude second failing to control for unobservable taste variations that are negatively correlated with the difference between an individual household s income and the income of the decisive voter is found to impart a significant negative bias into the income parameter estimate we find that conventional demographic descriptors do not adequately control for such taste variations and consequently fail to protect the income parameter estimates from this type of tiebout bias finally the significant negative relationship between individual household school expenditure demands and deviations of individual household income from the income of the decisive voter suggest that tiebout sorting is a significant phenomenon

racing with uncertainty and strategic interaction between competitors as the race unfolds most of the existing literature examines one or other of these features but not the two combined our aim is to see how the efforts of competitors in a race vary with the intensity of rivalry between them in our principal model whch is of a one dimensional race it is shown that the leader in the race makes greater efforts than the follower and efforts increase as the gap between competitors decreases under certain conditions the same results hold in our second related model which is of a two dimensional race

centralization fiscal federalism and private school attendance a cge model is used to analyze the impact of public school financing on private school attendance the common perception that public school finance centralization will necessarily lead to greater private school attendance is not correct in such a model even when that centralization involves an extreme equalization as in california furthermore if centralization is less dramatic as in most states declines in private school attendance are even more pronounced this weakens the speculation that low exit rates to private schools in centralizing states imply that general public school quality does not drop as a result of such centralization

regulation and preemptive technology adoption two rival firms must decide if and when to adopt a new technology knowing how adoption costs decline over time and how profit flows vary with adoption patterns in many cases price and entry regulations beneficially slow technology adoption by making preemption strategies less attractive in some cases these regulations can so discourage a firm from preemption as to change the order in which firms adopt new technologies speeding one firm s adoption date and slowing the other s in the context of a particular scenario for cable and telephone companies adoption of new fiber optic technologies the case for lifting the cross ownership ban depends on the extent to which telephone companies are able to implement a superior technology reregulation of cable companies strengthens this case

the effects of school spending on educational and economic outcomes evidence from school finance reforms since the coleman report many have questioned whether public school spending affects student outcomes the school finance reforms that began in the early 1970s and accelerated in the 1980s caused dramatic changes to the structure of k 12 education spending in the united states to study the effect of these school finance reform induced changes in public school spending on long run adult outcomes we link school spending and school finance reform data to detailed nationally representative data on children born between 1955 and 1985 and followed through 2011 we use the timing of the passage of court mandated reforms and their associated type of funding formula change as exogenous shifters of school spending and we compare the adult outcomes of cohorts that were differentially exposed to school finance reforms depending on place and year of birth event study and instrumental variable models reveal that a 10 increase in per pupil spending each year for all 12 years of public school leads to 0 31 more completed years of education about 7 higher wages and a 3 2 percentage point reduction in the annual incidence of adult poverty effects are much more pronounced for children from low income families exogenous spending increases were associated with notable improvements in measured school inputs including reductions in student to teacher ratios increases in teacher salaries and longer school years jel codes j10 i20 h7

immigration and spending on public education california 1970 2000 abstract the evolution of education spending in california has received plenty of attention from both academics and practitioners after this state s education finance reform in the 1970 s this paper quantifies the contribution of immigration to the relative decline in elementary and secondary public education spending per student in california in the period 1970 2000 a quantitative model of school choice and voting over public education is used to perform the counterfactual experiments of interest the model predicts that education spending per student in california would have been 24 higher in the year 2000 if u s immigration had been restricted to its 1970 level

effect of constraints on tiebout competition evidence from a school finance reform abstracteffect of constraints on tiebout competition evidence from a school finance reform regional studies michigan s school finance reform significantly increased state aid to low spending districts and placed restraints on the growth of spending in high spending districts it is noteworthy that there is no literature yet on the impact of such reforms on resource allocation by school districts this study begins to fill this gap it finds that the reform led the high spending districts to allocate a lower share of their total expenditure to support services and a higher share to instruction relative to the low spending districts to the extent that instructional expenditures are more productive and contribute to student achievement more than support services expenditures these results suggest that the reform led to a relative increase in productivity in the high spending districts

preemption in r d races abstract fudenberg gilbert stiglitz and tirole 1983 consider a patent race in which each firm s instantaneous probability of discovering a patentable invention is an increasing function of its cumulative expenditure on rd in particular we show that for intermediate values of it is possible for the follower to spoil the race by forcing the leader to drop out

an analysis of the war of attrition and the all pay auction we study the war of attrition and the all pay auction when players signals are affiliated and symmetrically distributed we a find sufficient conditions for the existence of symmetric monotonic equilibrium bidding strategies and b examine the performance of these auction forms in terms of the expected revenue accruing to the seller under our conditions the war of attrition raises greater expected revenue than all other known sealed bid auction forms journal of economic literature classification numbers d44 d82 1997 academic press

the welfare cost of free public schools the welfare cost of free public schools is the difference between the cost of those schools and the maximum parents would be willing to pay to send their children to those schools estimates based on data from california school districts in 1970 indicate that this welfare cost is substantial mostly because private schools are cheaper per unit of quality than public schools

innovation timing games a general framework with applications abstract we offer a new algorithm for analyzing innovation timing games its main advantage over the traditional approach is that it applies to problems that had previously been intractable we use the algorithm to examine two classical innovation problems we find that the competition takes the form of a waiting game with a second mover advantage either for any level of r d costs process innovation or for high r d costs product innovation moreover both models predict that the second mover advantage is monotonically increasing in the costs of r d

helping infant economies grow foundations of trade policies for developing countries conventional wisdom has it that trade enhances economic efficiency and thus promotes growth at least since robert m solow s 1957 pioneering work however technological progress has been recognized as the dominant factor in determining the rate of growth this is presumably even more true for developing countries for which the possibilities of closing the knowledge gap with advanced industrial countries offers especially large growth potential we examine the impact of trade restrictions in economies in which technological spillovers within countries and across industries are fundamental to the process of growth see kenneth j arrow 1962a 1962b paul m romer 1986 stiglitz 1987 since that work it has been clear that markets by themselves do not necessarily or in general lead to overall dynamic efficiency and that there are often trade offs between static inefficiencies e g associated with patent protection and long term growth we find here in particular that the dynamic benefits of broad trade restrictions may outweigh their static costs our analysis provides the basis of an infant economy as opposed to an infant industry argument for protection this paper develops a simple two sector model with an industrial modern and a traditional craft or agricultural sector there are four key features to the model a there are spillovers from the industrial sector to the craft sector for which firms in the industrial sector are not compensated b such spillovers are geographically based that is it is only productivity increases in the industrial sector in the developing countries that affect productivity increases in the traditional sector c innovations are concentrated in the industrial sector and d size is among the important determinants of the pace of innovation in the industrial sector earlier critiques of trade policies encouraging the development of the industrial sector in developing countries ignored these spillovers they argued in effect that korea would always have a comparative advantage in growing rice therefore it was foolish for it to try to restrict imports of industrial goods even if by so doing productivity in the industrial goods sector was increased it could never catch up so the protection would have to be permanent year after year the country would have been better off if it simply specialized in its own comparative advantage growing rice korea could and did catch up however at least in certain areas if catch up is possible then dynamic comparative advantage differs from static comparative advantage but even if korea s comparative advantage remained in agriculture industrial protection might be desirable because by supporting it one might have a more dynamic agricultural traditional sector trade restrictions enhance the size of the industrial sector the benefits spill over to the rural sector and national income grows at a possibly far faster pace after presenting the model we explain why the underlying hypotheses are plausible and argue that the model is broadly consistent with historical experience and empirical evidence

a theory of exit in duopoly we develop a duopoly model in which exit occurs because of the existence of fixed costs or opportunity costs each firm enters the market knowing its own cost but not that of its opponent as times goes on each firm becomes increasingly pessimistic about the cost of its remaining rival the time of exit is the only strategic variable so that our model is a war of attrition in contrast to the classic war of attrition however we assume that with positive probability each firm s costs may be low enough that staying in forever is a dominant strategy thus our model unlike the classic one has a unique equilibrium

real exchange rate policies for economic development abstract this paper analyzes the role of real exchange rate rer policies in promoting economic development markets provide a suboptimal amount of investment in sectors characterized by learning spillovers we show that a stable and competitive rer policy may correct for this externality and other related market failures the resulting development of these sectors leads to overall faster economic growth a system of effectively multiple exchange rates is required when spillovers across different tradable sectors differ the impact of rer policies is increased when they are complemented by traditional industrial policies that increase the elasticity of the aggregate supply to the rer among the instruments required to implement a stable and competitive rer are interventions in the foreign exchange market and regulation of capital flows we also discuss the trade offs associated with alternative stable and competitive rer policies and the relationship between the use of exchange rate policies for macro stability and for development

leaders and followers perspectives on the nordic model and the economics of innovation abstract what kinds of social and economic systems are most conducive to innovation we formulate a simple model in which countries can close the gap with the technological leader but where the cost of doing so may be so high that the country chooses to remain laggards observed disparities in productivity may be the result of a recognition that the cost of closing the gap exceeds benefit and there may therefore exist an international equilibrium in which there are leaders and followers even if it is granted that the united states is the leader and scandinavia are followers there are theoretical grounds for arguing that the nordic model may in fact be better for innovation suggesting that if the us adopted some of the nordic institutions innovations would be higher and societal welfare would be improved even more

what is behind the recent surge in patenting abstract we investigate the cause of an unprecedented surge of us patenting over the past decade conventional wisdom points to the establishment of the court of appeals of the federal circuit by congress in 1982 we examine whether this institutional change which has benefited patent holders explains the burst in us patenting using both international and domestic data on patent applications and awards we conclude that the evidence is not favorable to the conventional view instead it appears that the jump in patenting reflects an increase in us innovation spurred by changes in the management of research

rigging the lobbying process an application of the all pay auction textabstractin a world where a politician can explicitly auction off a prize to the high bidder the standard auction literature can be used to analyse political behavior the justice system however precludes politicians from explicitly selling the prize to the highest bidder thus politicians cannot let it become public knowledge that they are in the business of selling political favors an institution has emerged in political markets to overcome this constraint which are termed as lobbying lobbyists make implicit payments to the politician through campaign contributions if these up front payments were rebated to those failing to receive the prize it would be clear that the politician was selling favors this article has examined an interesting principle arising in all pay auctions this principle states that a politician wishing to maximize political rents may find it in his best interest to exclude certain lobbyists from participating in the lobbying process particularly lobbyists valuing most the political prize

investment timing and learning externalities abstract we study a duopoly model of investment in which each player learns about the quality of a common value project by observing some public background information and possibly the experience of his rival investment costs are private information and the background signal takes the form of a poisson process conditional on the quality of the project being low the resulting attrition game has a unique symmetric equilibrium which depends on initial public beliefs we determine the impact of changes in the cost and signal distributions on investment timing and how equilibrium is affected when a first mover advantage is introduced

real options and preemption under incomplete information abstract this paper introduces incomplete information and preemption into an equilibrium model of firms facing real investment decisions the optimal investment strategy may lie anywhere between the zero npv trigger level and the optimal strategy of a monopolist depending on the distribution of competitors costs and the implied fear of preemption our model implies that the equity returns of firms which hold real options and are subject to preemption will contain jumps and positive skewness

tiebout bias on the demand for local public goods abstract empirical work estimating the demand for local public goods has been based upon the median voter model it has generally proceeded with little consideration given to the possibility of tiebout type migration emphasized in the property value literature in this paper we raise the question of how valid the typical cross section demand estimation procedures are when possible tiebout like migration among jurisdictions is taken into account we find that such procedures are not in fact consistent with a model in which people vote with their feet as well as with ballots we also show that if a full tiebout equilibrium has been achieved in a set of communities there is a simple and obvious way to estimate demands for local public goods which is different from the median voter approach this technique has not to our knowledge been used in existing studies and moreover has some practical as well as theoretical advantages if the workings of the tiebout process are not taken into account more is involved than just impracticality we show that the estimated effects of personal characteristics will generally be biased and that that direction of the bias can usually be determined

games of perfect information predatory pricing and the chain store paradox the thesis of this paper is that finite noncooperative games possessing both complete and perfect information ought to be treated like one player decision problems that is players ought to assign at every move subjective probabilities to every subsequent choice in the game and ought to make decisions via backward induction this view is in contrast with the gametheoretic approach of nash equilibrium after expanding on this view for games in the abstract in sections 2 and 3 attention is turned in section 4 to an example due to reinhard selten called the chain store paradox which possesses the flavor of a situation involving a predatory pricing monopolist it is argued that for the chain store game the decision analytic approach leads under certain assumptions to more realistic outcomes than the standard nash equilibrium approach

public policies and the art of catching up matching the historical evidence with a multicountry agent based model in this paper we study the effects of industrial policies on international convergence using a multi country agent based model which builds upon dosi et al 2019b the model features a group of microfounded economies with evolving industries populated by heterogeneous firms that compete in international markets in each country technological change is driven by firms activities of search and innovation while aggregate demand formation and distribution follows keynesian dynamics interactions among countries take place via trade flows and international technological imitation we employ the model to assess the different strategies that laggard countries can adopt to catch up with leaders market friendly policies industrial policies targeting the development of firms capabilities and rd protectionist policies focusing on tariffs only we find that markets cannot do the magic in absence of government interventions laggards will continue to fall behind on the contrary industrial policies can successfully drive international convergence among leaders and laggards while protectionism alone is not necessary to support catching up and countries get stuck in a sort of middle income trap finally in a global trade war where developed economies impose retaliatory tariffs both laggards and leaders are worse off and world productivity growth slows down

unintended consequence of centralized public school funding in michigan education 1 introductionin an effort to create greater equity among school districts a number of states have shifted the responsibility for school funding from local school districts to the state although many researchers have found that centralizing funding for public schools has been successful in creating greater equity murray evans and schwab 1998 moser and rubenstein 2002 other researchers have pointed out that centralizing funding can lead to unintended consequences for example fischel 1989 1992 suggests that families in wealthier districts which have a stronger demand for education are no longer able to match their preference for education under a system of equalized funding in some cases this may drive parents to seek private school alternatives downes and schoeman 1998 1 in other cases families meet their preferences by making private contributions to public schools sonstelie and brunner 1997 furthermore theobald and picus 1991 argue that centralizing funding forces education as a state service to compete with other state services for funds and as a result the growth rate of spending per pupil decreases over time 2 these articles illustrate that policies designed to centralize control of public school funding can produce unintended consequences in this article we introduce into the literature an additional consequence caused by centralizing control of school funding we argue that centralized control of public school funding with the objective to equalize operating expenditures i e salaries supplies and other ongoing expenses across school districts while leaving capital acquisitions i e purchases of school buildings and other facilities under local control results in resource rich school districts becoming more reliant on debt financing 3 we find empirical support for this theory using data in the state of michigan during its transition to a centralized school financing system in 1994 in the next section we present an overview of michigan s move to a centralized funding policy in the third section we present the regression model used to test the theory followed by the description of the data and the estimated results the final section of the study summarizes our findings 2 overview of michigan s educational systemin 1993 a legislative anomaly lead to an abrupt change in the method of financing public education in michigan prior to 1993 michigan had one of the most locally controlled school systems in the united states over 65 of school operating expenditures came from local revenues whereas the remaining 35 were derived from state and federal sources courant gramlich and loeb 1995 property owners argued that local reliance on property taxes created an excessive burden and voiced their complaints to state representatives attempts to lower these taxes were defeated annually until debbie stabenow a democrat senator and candidate for governor frustrated with the tax debate proposed an absurdity to eliminate all property taxes without suggesting an alternative funding mechanism courant and loeb 1997 astonishingly the legislature passed her bill leaving the public school system with no means of funding seizing an opportunity to create greater equity among school districts michigan officials quickly devised a centralized system of financing public school operations known as proposal a that reduces districts reliance on local property taxes by increasing the state s sales tax integrated into proposal a is a distribution formula that reduces the disparity in operating expenditures across high and low spending school districts in part by constraining the allocation of operating funds for high spending districts however proposal a does not affect local control of funding for capital projects watkins 2002 michigan s state operating budget typically provides less than 5 of the total revenue needed to service school debt and no revenue for capital expenditures

the legacy of serrano the impact of mandated equal spending on private school enrollment 1 introduction the california supreme court decision in serrano v priest in 1971 was the first state supreme court ruling to declare a state s education finance system unconstitutional 1 the suit originally filed by a class of los angeles county public school children and their parents argued that the california public school finance system was unconstitutional because of its reliance on a local property tax system under this system large differences in property wealth created enormous variations in educational resources across the state in its subsequent 1976 serrano h decision the california supreme court found that the state legislature s response to the first serrano decision was insufficient the court ordered the state legislature to follow a trial court s requirement to implement a funding formula that reduces wealth related per pupil expenditure disparities i e property tax revenue exclusive of categorical aid and special needs to 100 across school districts the serrano ii decision resulted in a nearly complete shift of the fiscal responsibility for k 12 education in california from local to state government in the aftermath of the initial serrano decision suits were filed in several other states claiming unconstitutional inequities in the state education system many of these suits were successful between 1973 and 1983 six state supreme courts new jersey 1973 connecticut 1977 washington 1978 west virginia 1979 wyoming 1980 arkansas 1983 found their systems of educational finance unconstitutional similar rulings followed in 1989 in kentucky montana and texas in 1993 in massachusetts and tennessee in 1994 in arizona and in 1997 in new hampshire ohio and vermont a third of the states education finance systems now have been ruled unconstitutional as a result of these rulings and legislative based education reforms in a number of other states education expenditure inequality has been reduced 2 this in turn has left local districts with less latitude in determining spending levels parents in richer districts are expected to be especially frustrated with the limits on spending that accompany equalization changes in state educational finance systems to gain greater equity affected average spending on education in these states the initial research on this issue focused on the california experience where raw expenditure figures reveal the dramatic change in per pupil spending in california since the initial serrano decision in 1971 in academic year ay 1969 1970 per pupil spending in california s public elementary and secondary schools was slightly greater than the national average 106 25 of the national average ranking 14th among all states however by ay 1992 1993 education expenditures in california had fallen to 85 6 of the national average and its rank had dropped to 34th silva and sonstelie 1995 concluded that education spending in california in 1989 1990 was significantly lower than they would have otherwise predicted they attributed about half of the lowered spending to the legislation following serrano ii and the other half to the growth of the student population in california but the california experience of reduced expenditures appears to be atypical manwaring and sheffrin 1997 found spending to be higher in many states as a result of litigation or legislativebased educational finance reform downes and shah 1995 similarly estimated that school finance reform raised spending in some states and lowered spending in other states murray evans and schwab 1998 found state per pupil spending rose with successful state education finance litigation the variation across states in the spending effects of education finance reforms may be due to the source court ordered or legislative and or degree e g weak reform strong reform etc of the reforms in any case there should be greater interest in supplementing what the public schools do or opting out of the public system if reforms cause spending in a state to fall

preemption games with private information preemption games are widely used to model economic problems such as patent races we introduce private information into these games and allow for this information to stochastically change over time this reflects e g how r d competitors improve their innovations over time and keep these innovations secret before patenting them the analysis initially appears intractable because of the complexity of the equilibrium updating of beliefs on opponents information however we demonstrate the existence of a class of equilibria and calculate these equilibria in closed form we find that the expected durations in these equilibria are longer than when players information is public but in some cases shorter than in the collusive outcome hence r d secrecy slows down innovation disclosure

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

education finance reform and investment in human capital lessons from california abstract this paper examines the effect of different education financing systems on the level and distribution of resources devoted to public education we focus on california which in the 1970 s was transformed from a foundation system of mixed local and state financing to one of effectively pure state finance and subsequently saw its funding of public education fall between 10 and 15 relative to the rest of the us we show that a simple political economy model of public finance can account for the bulk of this drop we find that while the distribution of spending became more equal this was mainly at the cost of a large reduction in spending in the wealthier communities with little increase for the poorer districts our calibrated model implies that there is no simple trade off between equity and resources we show that if california had moved to the opposite extreme and abolished state aid altogether funding for public education would also have dropped by almost 10

all school finance equalizations are not created equal school finance equalization has probably affected american schools more than any other reform of the last 30 years understanding it is a prerequisite for making optimal social investments in human capital yet it is poorly understood in this paper i explain why it differs from conventional redistribution because it is based on property values which are endogenous to schools productivity taste for education and the school finance system itself i characterize equalization schemes and show why some level down and others level up schemes that strongly level down have unintended consequences even poor districts can end up worse off i also show how school finance equalization affects property prices private school attendance and student achievement

a dynamic game of r and d patent protection and competitive behavior a theory of dynamic optimal resource allocation to r and d in an n firm industry is developed using differential games this technique represents a synthesis of the analytic methods previously applied to the problem static game theory and optimal control the use of particular functional forms allows the computation and detailed discussion of the nash equilibrium in investment rules this paper addresses the problem of resource allocation to research and development among the important issues that a firm engaging in r and d must evaluate are uncertainty regarding the feasibility and profitability of a particular innovation the possibility of a protracted development period the possibility that a rival firm may innovate first capturing either a patent or a significant share of the new market the possibility that a rival firm may imitate the innovation and appropriate some of the profits in the new market in what follows we will develop a theory of optimal resource allocation to research and development which incorporates the aspects of r and d enumerated above we will use a dynamic game theoretic analysis determining the nash equilibrium strategies for n identical firms the availability of perfect patent protection is shown to accelerate development of the innovation and the effect of increasing rivalry is addressed the impact of increasing rivalry on nash equilibrium investment in r and d depends upon the degree of appropriability of rewards if patent protection is perfect then increasing the number of nash rivals results in increased r and d effort however when imitation is rewarded the opposite may be true finally some notions of competitive and perfectly competitive equilibrium are examined in the context of the model developed below

mobility constraints productivity trends and extended crises abstract in this paper we propose an interpretation of the current global financial crisis which emphasizes sectoral dislocation following localized technical change in the presence of barriers to labor mobility this tale is reminiscent of a similar tale concerning the great depression in the 30s technical change was localized in agriculture where income fell because rising productivity could not be offset by a shrinking labor force due to the costs of moving out of agriculture for unemployed workers inelastic demand for agricultural output meant that as output increased income declined as individual incomes fell below the level necessary to finance the transition to manufacturing excess labor became trapped in agriculture reducing wages and exacerbating the rise in output shrinking incomes in agriculture reverberated on the other sectors mainly manufacturing causing a large depression nowadays it is manufacturing that plays the role of epicenter of technical change falling incomes in manufacturing yield a lack of demand for goods produced in the rest of the economy namely the service sector this may be the deep rooted cause of the long lasting slump and the painfully slow recovery