School Spending, Income and Inequality: The Efficient Redistribution Hypothesis

Publication Date:
Jan 2008
Project Programs:
Social, Political, and Economic Inequality

In this paper, I test whether U.S. states that practiced more redistribution through school spending ended up producing adults whose incomes were higher on average and less unequal. I exploit substantial within-state variation generated by changes in school finance policies. Owing to rather arbitrary implementation of state Supreme Court judgements, the redistributive consequences of these policies are fairly uncorrelated with other factors affecting states' income distributions. I do find that redistributive school spending reduces income inequality among adults, but the effects are too weak to justify the use of school spending (as opposed to more direct mechanisms such as income transfers) for purely redistributive purposes. I do not find support for the Efficient Redistribution Hypothesis. Even if the Efficient Redistribution Hypothesis is correct is theory, it could fail to work in practice if schools that serve low income children make inefficient of resources.


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