preserving religious identity through education economic analysis and evidence from the us abstract this paper models the decision of religious parents to send their children to private religious schools as reflecting their desire to shield their children from external influences and thus preserve their religious identity it follows that when the share of the minority in the local population grows and outside influences become less threatening the demand for separate religious schooling among the members of the religious group decreases this pattern implies concavity in the relationship between enrollment in private and religious schooling and the share of the religious group in the population we present empirical evidence from united states county data on catholic and private school enrollment that strongly supports our theory the paper contributes to a better understanding of the demand for religious education

consumer default and the life cycle model this paper studies the impact of a default option on life cycle consumption using a two period life cycle model with uncertain income the paper demonstrates that a default option causes a kink in both the budget set and the indifference curve at the point where the individual switches from saving to borrowing this nonconvexity can have a dramatic impact on optimal consumption the paper also explores the circumstances under which liquidity constraints are likely to emerge and the characteristics of those borrowers who are likely to face constraints copyright 1995 by ohio state university press

immigration public education spending and private schooling this article examines the impact of immigration on private school enrollment through the mechanism of public education spending it finds that the immigrant share of population raises private school enrollment across countries by leading to a decrease in the share of public education spending the decrease is driven by responses to immigrants from culturally similar and developed countries this suggests that the role of public schools in promoting social cohesion among diverse populations is weighted against other concerns in education funding decisions in places with immigrant populations the endogeneity of immigrant share is accounted for by using an instrument constructed from gravity model estimates

vouchers and voting an initial estimate based on the median voter model one of the major concerns associated with school voucher proposals is that they will only benefit those who leave public schools in favor of private schools the children left behind in public schools are expected to necessarily be made worse off by such policies this paper provides evidence suggesting that children left behind in public schools will also benefit the available evidence suggests that after a voucher plan voter support for public schools will rise enough to increase the human capital of public school students despite the presence of negative peer group effects

competition between private and public schools vouchers and peer group effects a theoretical and computational model with tax financed tuition free public schools and competitive tuition financed private schools is developed students differ by ability and income achievement depends on own ability and on peers abilities equilibrium has a strict hierarchy of school qualities and two dimensional student sorting with stratification by ability and income in private schools high ability low income students receive tuition discounts while low ability high income students pay tuition premia tuition vouchers increase the relative size of the private sector and the extent of student sorting and benefit high ability students relative to low ability students

why voters may prefer congested public clubs governmental facilities for such services as education health and transportation are often small of poor quality and overcrowded even when the costs are spread among all taxpayers we also find that governments may subsidize private facilities providing the same services or may charge admission fees at public facilities we explain these phenomena with a model which considers two types of people rich and poor a majority consisting of poor people may purposely build small and low quality facilities to discourage use by the rich thereby lowering taxes for the same reason the poor may benefit from an admission fee at public clubs or even from a subsidy to private clubs they do not use

credit card debt and default over the life cycle this paper solves an empirically parameterized model of life cycle consumption which allows for uncollaterized borrowing and the possibility of default the simulation results show that i social stigma and credit limit have a very large impact on default rates ii education level also has a significant effect on the probability of default namely through differences in the shape of lifetime labor income profiles and iii the response of simulated default rates to labor income shocks is determined by the nature of labor income uncertainty temporary versus permanent additionally the model generates simultaneous consumer holdings of credit card debt and liquid assets

emerging markets and portfolio foreign exchange risk an empirical investigation using a value at risk decomposition technique abstract the correlation between a portfolio s equity and foreign exchange components plays a role in reducing foreign exchange exposure investors must account for this correlation when determining the extent of foreign exchange risk in emerging market equity portfolio investments this study employs a var risk factor mapping technique under the variance covariance var approach to decompose portfolio risk in argentina brazil china india mexico and russia for comparison purposes the same technique is used to decompose portfolio risk in the us the study is conducted from the perspective of a european equity investor with a portfolio of equities in each country by employing the var decomposition technique the correlation between a portfolio s equity and foreign exchange components is taken into account and portfolio foreign exchange risk is extracted from portfolio systematic risk our results uniquely demonstrate significant variation in foreign exchange risk in emerging markets

support for public provision of a private good with top up and opt out a controlled laboratory experiment abstract this paper presents the results of a revealed choice experiment testing the theoretical predictions of political economy models regarding public support for a publicly provided private good financed with proportional income taxes when individuals can purchase the good privately and either continue to consume public provision top up or forego public provision opt out but in each case continue to pay income taxes our laboratory results confirm behavior is consistent with the predicted majority preferred tax rate under mixed financing with top up but we identify preferences for significantly higher rates of public provision than predicted under mixed financing with opt out using non parametric regression analysis we explore the relationship between individuals top up and opt out decisions and both their income levels and the implemented tax rates

majority voting with single crossing preferences we clarify and extend a number of sufficient conditions for the existence of a majority voting equilibrium on one dimensional choice domains these conditions variously stated in the previous literature all impose order restrictions on voter preferences for instance monotone marginal rates of substitution which we show to imply or be equivalent to a general ordinal version of the single crossing condition this simple property is economically intuitive and easily checked in applications this ease of application is demonstrated through an examination of voting models of redistributive income taxation and trade union bargaining behaviour

competition between private and public schools testing stratification and pricing predictions abstract when there are peer effects in education private schools have an incentive to vary tuition to attract relatively able students epple and romano american economic review 88 1 1998 33 develop a general equilibrium model characterizing equilibrium pricing and student selection into schools when peer effects are present the model predicts that competition will lead private schools to give tuition discounts to more able students and that this will give rise to an equilibrium exhibiting stratification by income and ability between the public and private sectors and to a hierarchy of schools within the private sector the model also yields a variety of comparative static predictions the predictions of the model are tested in this paper using a unique data set assembled by figlio and stone research in labor economics 1999 115 tests of equilibrium predictions of the model reveal that the propensity to attend private school increases with both income and ability and among private schools the propensity to attend the highest tuition schools rises with both income and ability within private schools tuition declines with student ability with a substantial number of even high income households paying little or no tuition the correlation between income and ability is greater in public than private schools tests of comparative static predictions of the model reveal that both income and ability become stronger predictors of private school attendance as public school expenditure falls income becomes increasingly important in determining placement in the private school hierarchy as public school expenditure falls discounts to ability in the lowest quality private school decline as public school expenditure rises while discounts to ability in the highest quality private school are little affected by changes in public school expenditure expenditure in private schools rises as expenditure in public schools increases these empirical results are consistent with the predictions of the theoretical model

economic incentives and political institutions spending and voting in school budget referenda abstract allocation of resources in the local public sector involves economic and political forces in many u s states the bulk of spending on public education is subject to referendum we link spending proposals to referendum outcomes our model makes use of voting data to shed light on the extent to which referenda constrain spending we use data from school budget referenda in 544 new york school districts for the 1975 1976 school year our econometric results and simulations based on them reveal considerable sensitivity of spending to the form of the state grants in aid structure as well as to the referendum requirement in addition large school districts appear to behave more like budget maximizers than do small districts where proposals appear more in line with median voter demands

the religious factor in private education abstract we quantify the religious factor in private education in the united states by calibrating a political economy model of school choice among public private nonsectarian and subsidized religious schools in which parents differ in their incomes and in their preferences for religious education this shows strong latent demand for religious schooling conditioned on current subsidized tuition levels in parochial schools which is suppressed by the need to pay twice for private education applying the results of the calibration to gauge the effect of means tested school voucher programs on religious and nonsectarian private enrollment we find that when the amount of the voucher is relatively small including subsidized religious schools in such programs is necessary for providing low income families effective access to private education

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

education finance reform and the distribution of education resources between 1971 and 1996 opponents of local funding for public schools successfully challenged the constitutionality of school finance systems in sixteen states using the variation across states in the timing of these cases the authors investigate the impact of reform on the distribution of school resources their results suggest that court ordered finance reform reduced within state inequality in spending by 19 to 34 percent successful litigation reduced inequality by raising spending in the poorest districts while leaving spending in the richest districts unchanged thereby increasing aggregate spending on education reform led states to fund additional spending through higher state taxes copyright 1998 by american economic association

parental choice of school characteristics estimation using state wide data this article attempts to proxy parental alienation from public schools across states in order to obtain measures of quality dispersion and of the educational characteristics to which families are most sensitive the indicator of alienation is the choice of private schooling since the likelihood of such choice is known from published enrollment ratios the task is to explain why they vary so widely across states of the newer hypotheses tested that of teacher strike records is strongly significant and in the expected direction other novel findings concern the share of administration teacher memberships of the national education association and the proportion of whites to nonwhites in the population

the effect of liquidity constraints on consumption a cross sectional analysis this paper examines the effect of liquidity constraints on consumption expenditures using a single year cross section data set a reduced form equation for consumption is estimated on high saving households by the tobit procedure to account for the selectivity bias since high saving households are not likely to be liquidity constrained the estimated equation is an appropriate description of how desired consumption that would be forthcoming without liquidity constraints is related to the variables available in the cross section data when the reduced form equation is used to predict desired consumption the gap between desired consumption and measured consumption is most evident for young households

mobility targeting and private school vouchers simulations are derived from a three district model of low middle and highincome school districts calibrated to new york data with housing stocks that vary within and across districts in this model it is demonstrated that school district targeted vouchers are similar in their impact to nontargeted vouchers but vastly different from vouchers targeted to low income households furthermore strong migration effects are shown to significantly improve the likely equity consequences of voucher programs jel 122 128 h73 persistent frustration with the perceived low quality of public education exacerbated by concerns over the inherently unequal levels of public school quality across school districts has caused policy makers courts and researchers to investigate modifications and alternatives to the current public school system one idea that has received increasing academic and public attention is that of private school vouchers with proponents arguing that the competitive pressures of voucher programs would cause improvements in the efficiency of the publicschool system while at the same time addressing equity concerns if vouchers can be targeted to low income households or low income school districts but aside from a few limited experiments in some u s cities our experience with vouchers in the united states remains virtually nonexistent this limits the amount of information researchers can derive from standard empirical analysis in that it forces them to rely on only current nonvoucher induced differences in competition despite important suggestive results such work may not anticipate all the impacts from a large scale policy such as the voucher policies currently under discussion at the same time theoretical models of school finance are also limited in that they often either focus on only one particular aspect of the general equilibrium school finance problem or they are too rich and complex to yield crisp predictions

ends against the middle determining public service provision when there are private alternatives abstract public provision of a service coexists with private market provision the quality of public provision is determined by majority vote preferences are not single peaked owing to the presence of private alternatives we identify two cases in one majority voting equilibrium always exists and the median income voter is pivotal in the other a necessary condition for equilibrium indentifies the pivotal voter who must have income below the median when equilibrium exists a coalition of middle income households who consume the public alternative will be opposed by a coalition of rich and poor households with the rich choosing private consumption

should i stay or should i go exit options within mixed systems of public and private health care finance abstract mixed public private finance is widespread in health care systems internationally in one variant of mixed finance some countries e g germany allow eligible beneficiaries to fully exit from the public social insurance system and purchase private insurance using a controlled laboratory experiment we empirically investigate the predictions of a political economy model of mixed systems of public and private finance with two types of exit universal exit when all individuals can choose to exit the public system and conditional exit when only individuals with an income at or above a threshold income level can choose to exit we find that high income individuals are less likely to exit under universal exit than under conditional exit despite having the same incentive to exit in both treatments sensitivity treatments suggests that a number of factors may be at play in explaining this result including learning effects a priming effect and a framing effect but that other regarding preferences do not appear to be an important factor

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

explaining interstate variation in income inequality this paper investigates interstate variation in income inequality by avoiding inequality indices and focusing directly on the lorenz curve the authors provide a more general explanation of the differences in inequality they find that mean family income the standard deviation of years of schooling per capita educational expenditure and property income are robust predictors of inequality of particular interest is their finding that ceteris paribus higher per capita education expenditures tend to be associated with states that have income inequality which is greater than the u s average copyright 1992 by mit press

educational vouchers welfare effects and voting abstract we analyze the welfare effects and voting equilibrium with vouchers for private schools the analysis shows that vouchers like tuition tax credits martinello and west 1988 frey 1983 may improve the welfare of all families including families whose children remain in public schools if public educational quality is unchanged and publicly financed educational expenditures decrease thus voters will approve a voucher only if it reduces taxes when public educational quality is endogenous a voucher may increase quality by reducing the tax cost of quality and will be approved if it reduce taxes at the pre voucher public education level and increases quality

to segregate or to integrate education politics and democracy how is the quality of public education affected by the presence of private schools for the rich theory and evidence suggest that the link depends crucially on the political system we develop a theory that integrates private education and fertility decisions with voting on public schooling expenditures we find that the presence of a large private education sector benefits public schools in a broad based democracy where politicians are responsive to low income families but crowds out public education spending in a society that is politically dominated by the rich the main predictions of the theory are consistent with state level data and micro data from the u s as well as cross country evidence from the programme for international student assessment study

the political economy of school choice linking theory and evidence abstract we derive an improved methodology for linking theoretical parameters of a political economy model of school choice to empirical values estimated by regressing local private enrollment shares on mean income the median to mean ratio religious and ethnic composition and other variables this leads us to reject the commonly maintained assumption that a coalition of ends against the middle determines local school funding and to conclude instead that the median income voter is decisive it also allows us to estimate the perceived relative efficiency advantage of private schooling which we find to be about 30 at the margin

private and public choices in public education an investigation of trustee effects the paper applies the concepts of the horizon problem agency costs monitoring and special interest incentives to trustee management of public schools and higher education we examine whether south carolina s 1984 education improvement act a major restructuring of educational organization and spending in south carolina is related to the ratio of pupils in private versus public schools we employ 30 years of county level data in south carolina and we uncover several things there is no statistically credible relation between public school expenditures per pupil and the private school public school enrollment ratio however we do find that the directed changes in rules organizational structure and incentives mandated by the 1984 educational improvement act are associated with a reduction in the relative number of children attending private school we interpret this to mean that the features of the law requiring better accountability and the like were perceived by parents to make for better education while the increased money spent was only a transfer to teachers or some other groups we find that organization matters more than money

tiebout bias and the demand for local public schooling institute of university of ii business and california economic research berkeley center for real estate and urban economics working paper series working paper 86 109 tiebout bias and the demand for local public schooling by daniel l rubinfeld perry shipiro judith roberts these papers are preliminary in nature th urpose 39 to stimulate 39 ussion comment therefore they are not t cited or quoted 39 ny p ation wit express permissio the author graduate school of business administration

consumption and credit constraints international evidence abstract if some consumers are liquidity constrained aggregate consumption should be excessively sensitive to credit conditions as well as to income moreover the excess sensitivity may vary over time using data for the united states canada the united kingdom japan and france we find a substantial impact of credit aggregates on consumption in all countries considered moreover the borrowing lending wedge is a significant determinant of consumption in the united states canada and japan using extended kalman filtering techniques we show that the excess sensitivity varies over time with a clear tendency to decline in the united states

differences in metropolitan and nonmetropolitan u s family income inequality a cross county comparison abstract u s family income inequality is examined using 1990 cenus of population data for the 3109 counties and independent cities in the 48 contiguous states use of counties as the unit of analysis extends previous research on u s income inequality that relied on national state or metropolitan level data in addition including both metropolitan and nonmetropolitan counties allows us to determine whether income inequality differs between them after controlling for a variety of labor market demographic and regional characteristics as another innovation we also consider whether counties that experienced recent structural changes in industry composition have higher income inequality

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

the permanent income hypothesis and the real interest rate some evidence from panel data abstract a test of the permanent income hypothesis in panel data is formulated taking into account both the time series and cross section variation in the rate of return the over identifying restrictions of the theory rejected

finishing high school and starting college do catholic schools make a difference in this paper we consider two measures of the relative effectiveness of public and catholic schools finishing high school and starting college these measures are potentially more important indicators of school quality than standardized test scores in light of the economic consequences of obtaining more education single equation estimates suggest that for the typical student attending a catholic high school raises the probability of finishing high school or entering a four year college by thirteen percentage points in bivariate probit models we find almost no evidence that our single equation estimates are subject to selection bias