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.
File(s): File format is application/pdf https://www.minneapolisfed.org/institute/working-papers-institute/iwp47.pdf
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Opportunity and Inclusive Growth Institute Working Papers
Publication Date: 2021-03-22