Effect of constraints on Tiebout competition: evidence from a school finance reform

ABSTRACT

Effect 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.

摘要

蒂鲍特竞争的限制效应：来自学校财政改革的证据，区域研究。密西根的学校财政改革，显着增加了州对低度支出区域的补助，并对高度支出区域的支出成长施以限制。值得注意的是，至今尚未有文献探讨此般改革对学区资源分配之影响，而本研究便着手填补此一阙如。本研究发现，上述改革导致高度支出的区域，将其总支出中较少的部分分配至支援服务，以及较多的部分分配至教学（相对于低度支出区域而言)。教学支出更具生产力，且较支援服务支出对学生的成就更具贡献，故这些研究成果就此主张，此般改革导致了高度支出区域的生产力的相对提高。

RÉSUMÉ

L’impact des contraintes sur le modèle de concurrence de Tiebout: des résultats obtenus d’une réforme du financement de l’éducation. Regional Studies. La réforme du financement de l’éducation à Michigan a augmenté sensiblement les aides d’état visant les zones à faible budget et a maîtrisé la croissance des dépenses des zones à budget élevé. Il est à noter que jusqu'ici il n'existe pas de documentation à propos de l'impact de telles réformes sur l'allocation des ressources financières en fonction des autorités locales décisionnaires dans le domaine de l'enseignement primaire et secondaire. Cette présente étude cherche à colmater cette brèche. Il est à constater que la réforme a incité les zones à budget élevé à allouer une part inférieure de leurs dépenses globales aux services d'assistance et une part supérieure à l’éducation (par rapport aux zones à faible budget). Dans la mesure où les dépenses au titre de l’éducation sont plus productives et contribuent davantage à la réussite scolaire que ne le font les dépenses en services d'assistance, ces résultats laissent supposer que la réforme a entraîné une augmentation relative de la productivité dans les zones à budget élevé.

ZUSAMMENFASSUNG

Auswirkung von Einschränkungen auf den Tiebout-Wettbewerb: Belege einer Schulfinanzreform. Regional Studies. Die Schulfinanzreform in Michigan führte zu einer erheblichen Erhöhung der staatlichen Zuschüsse für Bezirke mit niedrigen Ausgaben und zu Einschränkungen des Ausgabenwachstums in Bezirken mit hohen Ausgaben. Bemerkenswerterweise gibt es bisher noch keine Literatur über die Auswirkung solcher Reformen auf die Ressourcenzuweisung durch Schulbezirke. Mit dieser Studie beginnt sich diese Lücke zu schließen. Nach unseren Ergebnissen führten die Reformen in Bezirken mit hohen Ausgaben dazu, dass (im Vergleich zu Bezirken mit niedrigen Ausgaben) ein geringerer Anteil der Gesamtausgaben unterstützenden Leistungen und ein höherer Anteil dem Unterricht zugewiesen wurde. Da Ausgaben für den Unterricht produktiver sind und stärker zum Erfolg der Schüler beitragen als Ausgaben für unterstützende Leistungen, legen diese Ergebnisse den Schluss nahe, dass die Reform in Bezirken mit hohen Ausgaben zu einer relativen Erhöhung der Produktivität führte.

RESUMEN

Efecto de restricciones sobre la competencia según el modelo de Tiebout: ejemplo de una reforma financiera escolar. Regional Studies. La reforma financiera escolar de Míchigan hizo aumentar considerablemente la ayuda estatal a distritos con bajos gastos y puso limitaciones al crecimiento del gasto en distritos con gastos altos. Cabe señalar que todavía no existe bibliografía sobre el impacto de estas reformas en la asignación de recursos por parte de los distritos educativos. Con este estudio pretendemos cubrir este vacío. Observamos que la reforma obligó a los distritos con gastos altos (en comparación con los distritos con gastos bajos) a asignar una proporción menor de sus gastos totales a servicios de apoyo y una proporción más alta a la enseñanza. Teniendo en cuenta que los gastos en educación son más productivos y contribuyen más al rendimiento escolar que los gastos en servicios de apoyo, estos resultados indican que la reforma condujo a un aumento relativo de la productividad en los distritos con gastos altos.

KEYWORDS:

• Tiebout
• incentives
• resource allocation
• school finance

关键词:

• 蒂鲍特
• 动机
• 资源配置
• 学校财政

MOTS-CLÉS:

• Tiebout
• incitations
• allocation
• financement de l’éducation

SCHLÜSSELWÖRTER:

• Tiebout
• anreize
• ressourcenzuweisung
• schulfinanzen

PALABRAS CLAVES:

• Tiebout
• incentivos
• asignación de recursos
• finanzas escolares

JEL:

• H4
• I2
• R0

ACKNOWLEDGEMENTS

The authors thank Julie Cullen, Tom Downes, Fernando Ferreira, Maria Ferreyra, David Figlio, Roger Gordon, and the participants at the Association for Education Finance and Policy, National Bureau of Economic Research (NBER) Fiscal Federalism workshop, as well as New York University for helpful comments and discussions. Maricar Mabutas provided excellent research assistance. The views expressed in this paper are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. The authors remain solely responsible for all errors.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

SUPPLEMENTAL DATA

Supplemental data for this article can be accessed at http://10.1080/00343404.2016.1142666

Notes

1. Hoxby (2001) argues, unlike most other reforms, that school finance equalization has affected almost every school in the nation – some of them dramatically.

2. This study uses the words ‘expenditure' and ‘spending' interchangeably.

3. Michigan ranked after New Hampshire (86%), Illinois (62%) and Vermont (61%); subsequently, in 1997, both Illinois and Vermont overhauled their school finance programmes.

4. Other categories were non elementary/secondary expenditure, capital expenditure, interest on debt, and payments to other school systems; other than capital expenditure, these categories were very small.

5. Some data on ethnicity for the early years come from the Common Core of Data of the NCES.

6. Henceforth this paper refers to school years by the calendar year of the spring term; for example, 1990 refers to academic year 1989–90, and so on.

7. In fact, according to Michigan law, district administrators have discretion over their employment mix. The Michigan (Revised) school code, section 380.11a, notes that:

(3) A general powers school district has all of the rights, powers, and duties expressly stated in this act; […] including, but not limited to, all of the following: […] (d) Hiring, contracting for, scheduling, supervising, or terminating employees, independent contractors, and others to carry out school district powers.

8. This classification follows Roy (2011) and Chakrabarti and Roy (2015). Cullen and Loeb (2004), too, have a similar classification in terms of quintiles of pre-reform spending distribution. There are an additional 31 non-K-12 districts in Michigan; however, most of these are very small.

9. Detroit is the biggest school district in Michigan, alone accounting for about 10% of all Michigan K-12 students.

10. One should not expect the effects across the shares of the three categories to sum to zero as the share variables are expressed as percentages of total expenditure, not total current expenditure (so the shares do not sum to 100). On the other hand, the shares (dependent variables) in Table A1 in the supplemental data online are expressed as percentages of total current expenditure – consequently, these shares sum to 100 and post-reform effects for each group across the different categories sum to zero.

11. Groups 2 and 3 show the largest trend declines in general administration share.

12. It is important to note that an increase in productivity does not by itself imply an increase in welfare. Given revenue constraints, the high-spending school districts may have cut back on some of their ‘boutique' offerings – say, generous support for instructional staff – and instead focused on ‘the basics'. But residents in these districts might have been willing to pay for these and could seek out other options. The lack of private school entry suggests that these welfare losses (if any) were not large, although some of these previous offerings may have been replaced by after-school tutoring and private lessons.

13. While an increase in pre-reform spending was associated with positive intercept shifts for support services share, this was more than offset by the negative trend shift after two years.

14. The only exception was general administration support share where both the trend and the intercept shifts were positive. However, both shifts were economically small and never even close to being statistically significant. Also, general administration share only contributed a small portion of spending, being the smallest category of support services spending.

15. Owing to lack of space, these tables report the impacts on the shares of the various components of support services. The results for the other variables are similar to those obtained above and are available from the authors upon request.