Working Paper

Saving the American Dream? Education Policies in Spatial General Equilibrium

Abstract: Children's education and economic opportunities differ substantially across US neighborhoods. This paper develops and estimates a spatial equilibrium model that links children's education outcomes to their childhood location. Two endogenous factors determine education choices in each location: local education quality and local labor market access. We estimate the model with US county-level data and study the effects of a school funding equalization on education outcomes and social mobility. The reform's direct effects improve education outcomes among children from low-skill families. However, the effects are weaker in spatial general equilibrium because average returns to education decline and residential and educational choices of low-skill families shift them toward locations with lower education quality.

Keywords: Intergenerational mobility; Equality of opportunity; School access; Education reform; Regional labor markets; Economic geography; Spatial economics;

JEL Classification: E24; E62; R12; R23; I24; I28;

https://doi.org/10.21034/iwp.47

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Opportunity and Inclusive Growth Institute Working Papers

Publication Date: 2021-03-22

Number: 47