School finance reform and voluntary fiscal federalism

California has transferred the financing of its public schools from localities to the state. In response, many families have supplemented the tax revenue of their local public schools with voluntary contributions. This paper analyzes that phenomenon. We propose a model of partial cooperation among parents in making voluntary contributions to their public schools. Under reasonable conditions, the model predicts that contributions per pupil should decline with school size. We estimate this relationship using data on contributions to California schools. Our estimates reveal that contributions per pupil do decline with size; however, the rate of decline is surprisingly slow.     

The effect of school resources on educational attainment: evidence from Denmark

We investigate the effect of school inputs in primary and lower secondary schools on the probability of eventually passing upper secondary or vocational education. Danish administrative register data for a large number of young people and their parents are used. Educational outcome and controls for family background are measured at the individual level, whereas school expenditure and controls for municipal socioeconomic characteristics are measured at the municipal level. As unobserved characteristics may be correlated for pupils within the same municipality, we estimate linear probability and logit models with random municipal‐specific effects in addition to standard OLS and logit models. With the full sample of pupils and the full set of controls, we find that expenditure per pupil has a statistically significant, but rather small, positive effect on educational attainment. Effects of teacher–pupil ratios are less significant. The expenditure effects are generally higher for pupils from disadvantaged backgrounds.     

Efficiency and Equity in Funding for Government Schools in Australia

This study measures cost inefficiency for government school in New South Wales, Australia using a two‐stage data envelopment analysis (TSDEA) model and the inefficiency‐effects model (Battese & Coelli, 1995). The study found overall primary schools are 75 per cent and secondary schools are 89 per cent cost efficient. However, cost efficiency for primary schools has decreased and for secondary schools has increased marginally over the study period. The study found that social disadvantage in primary schools exerts a strong negative impact on students’ achievement scores causing inefficient use of available resources. For secondary schools no such conclusive relationship is observed.     

Economies of Scale and Utilization: An Analysis of the Multi-Plant Generation Costs of the Electricity Commission of New South Wales, 1970/71–1984/85*

We examine the average costs of electricity generated in NSW at the site level employing a new simultaneous-equations model approach Further, we argue that costs depend principally on unit size and capacity utilization We reinterpret capacity utilization as a compositional variable which is a continuous proxy for the (inverse of) the intensity of demand for electricity, thus partially addressing the multi-product nature of electricity. Low capacity utilization corresponds to intense demands and hence peaking output We find that costs per kWh, as conventionally measured, are highly sensitive to the degree of capacity utilization but less so to unit size (scale). The results emphasize the need for tine-related pricing     

Charter school quality and parental decision making with school choice

Charter schools have become a very popular instrument for reforming public schools, because they expand choices, facilitate local innovation, and provide incentives for the regular public schools while remaining under public control. Despite their conceptual appeal, analysis has been hindered by the selective nature of their student populations. This paper investigates the quality of charter schools in Texas in terms of mathematics and reading achievement and finds that average school quality in the charter sector is not significantly different from that in regular public schools after an initial start-up period but that there is considerable heterogeneity. Perhaps more important for policy, however, is the finding that the parental decision to exit a charter school is significantly related to school quality. The magnitude of this relationship is substantially larger than the relationship between the probability of exit and quality in the regular public school sector and consistent with the notion that the introduction of charter schools substantially reduces the transactions costs of switching schools.     

The Effect of the Quasi–market on the Efficiency–equity Trade–off in the Secondary School Sector

Britain’s education system was radically transformed during the 1990s following the Education Reform Act (1988). The primary objective of these reforms was to raise educational standards through the creation of a quasi–market based upon greater parental choice and the transfer of control over resources from local education authorities to schools. The purpose of this paper is to investigate the effects of the quasi–market on efficiency and equity in the secondary education sector in England during the 1990s. Two primary questions are addressed. Has the quasi–market led to an improvement in efficiency in the secondary education sector? Has the quasi–market had any adverse consequences on the social segregation of pupils between schools? Using data obtained from the Schools’ Census and the School Performance Tables, we find strong evidence that the quasi–market has led to a substantial improvement in efficiency (as measured by a school’s exam performance and by the productivity of staff) during the 1990s. The same market forces have led to a greater social segregation of pupils between schools.     

Trade, Skills and Adjustment Costs: A Study of Intra-Sectoral Labor Mobility

The relationship between the ability of workers to change job, sector or industry and the short‐run adjustment costs associated with a reallocation of labor is the subject of lively debate among academics. This paper examines recent sector and industry level labor market adjustment in the UK using data from the Quarterly Labour Force Survey. We explore the link between the nature of UK trade patterns and labor adjustment within the manufacturing sector and employ a multinomial logit approach to examine the determinants of “within” and “between” industry mobility. By controlling for individual skill specificity we find some evidence of a link between intra‐industry trade and intra‐industry labor adjustment.     

Examination performance in Scottish secondary schools: an ordered logit approach

This paper analyses the determinants of educational outcomes for Scottish secondary schools. Using an ordered logit model with data on school examination performance for pupils in the last year of compulsory education, separate equations are estimated for 1993–1994 and 1998–1999. The empirical results, in line with previous British studies, underline the importance of family, peer group and school influences in determining educational outcomes. They cast doubt, however, on suggestions that there is an ‘optimal’ size of school.     

Why is There a Graduate Earnings Premium for Students From Independent Schools?

We examine the determinants of occupational earnings of UK 1993 graduates and focus on the influence of the type of school the graduate attended prior to university entrance. For data reasons, we restrict attention to graduates who attended school in England. We estimate that, on average, a male (female) graduate who attended an Independent school receives an earnings premium of 3.1 per cent (3.4 per cent) over and above the earnings of a graduate who attended an LEA school, ceteris paribus . We also find considerable variation across different Independent schools in the size of the graduate earnings premium, especially for males, and show that in the case of males the premium increases with the level of school fees, but is not statistically related to measures of school–level average academic performance.     

School Finance Induced Migration and Stratification Patterns: The Impact of Private School Vouchers

This paper introduces a general equilibrium model of public school finance that includes: (i) multiple school districts that finance local public schools via property taxes set by majority vote; (ii) multiple neighborhoods within school districts where each neighborhood is characterized by a quality level of housing; (iii) local public schools that are obligated to admit all interested students who reside within the school district; (iv) private schools that function as clubs of parents who share the cost of the private school equally and who can choose to exclude others; (v) an educational production process that depends on both per pupil spending and average peer quality within the school; and (vi) individual peer quality levels that are correlated with the socioeconomic status of households. Since it allows for various degrees of imperfect stratification of residents across communities, the model is well suited for investigating empirically relevant migration forces induced by school finance reform proposals. The abstract model itself, however, is too complex to yield many analytic results. A computational counterpart to the model isnb therefore developed, calibrated to data, and utilized for policy experiments. In particular, the impact of vouchers in the context of different types of prevoucher educational finance systems is investigated, and it is found that migration patterns in general would cause vouchers to benefit public schools in poor communities while hurting public schools in wealthy communities.     

Public Sector Pricing,Capital Mobility and National Income: A Two‐Sector General‐Equilibrium Analysis

Abstract This paper examines the resource allocation and income effects of public‐sector pricing. During the short run, raising public‐sector prices leads to a worsening in public‐sector efficiency, causing a decline in GNP. In the intermediate run, the policy begins to improve public‐sector efficiency and, hence, increases GNP. At the outset of the transition to a steady state, the pricing policy continues to improve efficiency. Nevertheless, efficiency and GNP remain invariant across steady states in the long‐run equilibrium. The implications of the pricing policy are also discussed.     

Trade liberalization,firm entry,and income inequality

This paper examines the short‐ and long‐run effects of trade liberalization via tariff reductions on income inequality in an economy, which is characterized by an imperfectly competitive urban manufacturing sector and a perfectly competitive rural agricultural sector. Tariff reductions reduce domestic output in the importable urban manufacturing sector, leading to shifts of capital from the urban sector to the rural agricultural sector. This can narrow the wage gap between skilled and unskilled labor in the short run. However, the lowered capital cost attracts new firms, and subsequently excessive entry of firms, to the urban manufacturing sector. This firm entry effect can mitigate the favorable effect of tariff reductions on wage inequality in the long run. Empirical study confirms the findings.     

Measuring market power and the efficiency of Alberta's restructured electricity market: An energy‐only market design

We measure the degree of market power execution and inefficiencies in Alberta's restructured electricity market. Using hourly wholesale market data from 2008 to 2014, we find that firms exercise substantial market power in the highest demand hours with limited excess production capacity. The degree of market power execution in all other hours is low. Market inefficiencies are larger in the high demand hours and elevate production costs by 6.7%–19% above the competitive benchmark, with an average of 13%. This reflects 2.1% of the average market price across all hours. A recent regulatory policy clarifies that certain types of unilateral market power execution is permitted in Alberta. We find evidence that suggests that strategic behaviour changed after this announcement. Market power execution increased. We illustrate that the observed earnings are often sufficient to promote investment in natural gas based technologies. The rents from market power execution can exceed the estimated capacity costs for certain generation technologies. However, we demonstrate that the energy market profits in the presence of no market power execution are generally insufficient to promote investment in new generation capacity. This stresses the importance of considering both short‐run and long‐run electricity market performance measures.     

SHAKEOUTS AND MARKET CRASHES*

This article provides a microfoundation for the rise in optimism that seems to precede market crashes. Small, young markets are more likely to experience stock‐price run‐ups and crashes. We use a Zeira–Rob type of model in which demand size is uncertain. Optimism then grows rationally if traders' prior distribution over market size has a decreasing hazard. Such prior beliefs are appropriate if most new markets are duds and only a few reach a large size. The crash occurs when capacity outstrips demand. As an illustration, for the period 1971–2001 we fit the model to the Telecom sector.     

Changes in Hospitalisation Rates and Costs in New South Wales, 1996–97 and 2000–01

Changes in hospital admission rates and costs in New South Wales (NSW) between 1996‐97 and 2000–01 were examined by age, hospital type and socioeconomic status. A novel method led to a more accurate assessment of hospital patients' socio‐economic status than was previously possible. Use of unit record hospitals data and full population Census data allowed very high levels of disaggregation. Considerable increases in the baby boomer and frail aged populations led to higher hospital admission rates over the period. This was driven by the private sector, which saw its admission rates increase by 20 per cent (with the public sector rate declining by 6per cent). Public hospital admission rates by age were found to be up to 40 per cent greater for the poorest 20 per cent of the population than for the richest 20 per cent‐with a reversal of the pattern for private hospitals (up to 45 per cent greater for the richest 20 per cent than for the poorest 20 per cent). In a period when total NSW hospital expenditures increased by 21 per cent, we found that ‘per admission costs’ in the inpatient non‐psychiatric sub‐sector changed little.     

Walrasian General Equilibrium Allocations and Dynamics in Two-Sector Growth Models

This paper analyzes and solves miniature Walrasian general equilibrium systems of momentary and moving equilibria. The Walrasian framework encompasses the fundamental neoclassical and classical two‐sector growth models; the families of solutions of steady‐state and persistent growth per capita in various competitive two‐sector economies are parametrically characterized. Moreover, the endogenous behavior of relative prices and the sectoral allocation of primary factors are analyzed in detail. The technology parameters of the capital good industry are decisive for obtaining long‐run per capita growth in closed (global) economies. A review of the literature complements the theorems on the general equilibrium allocations, dynamic systems, and the time paths of Walrasian two‐sector economies.     

THE CASE FOR PAY-AS-YOU-GO PENSIONS IN A SERVICE ECONOMY

The elderly consume more labour‐intensive services than young individuals. This makes them vulnerable to rising costs of services due to higher wages, which can be caused by increased capital accumulation. This paper shows that in a model with a service sector, the golden‐rule capital stock is lower and dynamic inefficiency is more likely to occur than in the conventional one‐sector model. This implies that in many cases, a positive Pay‐As‐You‐Go tax maximises long‐run welfare in a service economy. Calculations based on data from the United Kingdom and the Netherlands show that the long‐run optimal degree of funding coincides with the current situation in these countries.     

A Post-Keynesian Model of the Palestinian Economy: The Economics of an Investment-Constrained Economy

The 60-year-old Israeli-Palestinian conflict has deeply influenced the evolution of the Palestinian economy. In the last two decades political instability and the Israeli closure policy have generated protracted economic stagnation and poor capital formation. The paper describes the consequences on the Palestinian economy of existing high transaction costs and market fragmentation. We propose a simple one-sector Post-Keynesian model that describes Palestine as a demand-driven economy. We show that high transaction costs and market fragmentation discourage investment by curtailing expected profitability, reducing the size of the market and depressing entrepreneurs' animal spirits. In the short run, these two factors induce low levels of capacity utilization and low rates of capital accumulation. The situation is even more worrying in the long run when entrepreneurs can revise their expectations. Depressed animal spirits and low levels of capacity use give rise to a low-growth trap from which Palestine can hardly escape. We also highlight the possible positive impact of the removal of high transaction costs and of market fragmentation, and the ensuing beneficial effects on the long-run equilibrium values of capital accumulation and capacity use. The conclusions place these analytical results into the historical situation of the Palestinian economy, and consider what is needed, politically and economically, in order to establish a sustained development process.

The division of labour is limited by the extent of the market. (Adam Smith, Wealth of Nations, Book I, chapter III)     

ADDICTIVE DRUG USE MANAGEMENT POLICIES IN A LONG‐RUN ECONOMIC MODEL*

A model of illicit, addictive drug use is proposed when users have foresight. Impacts of drug use penalties, penalties on drug use‐related crime, support for drug user rehabilitation as well as the effects of health‐related, harm‐minimisation policies are analysed. In the short run, government policies impact only on the drug use intensities of existing addicted and casual users. Longer term policy‐induced user‐cost changes impact on new user and addict numbers through their effect on recruitment into addiction and quit dynamics. Effects of policies on user numbers, usage intensities and impacts on long‐run social costs are analysed over this long‐term horizon. The model provides a setting for analysing the long‐run effects of illicit drug management policies on the social costs of illicit drug use and allows assessment of drug use abstinence and harm minimisation policy tradeoffs.     

Wage Inequality,Increased Competition,and Trade Liberalization: Short Run vs Long Run

This paper examines the impact of increased competition and trade liberalization on skilled–unskilled wage inequality in the short run as well as the long run. It is shown that an increase in the number of firms in the producer services sector increases wage inequality in the short run even if the income shares of capital in the industrial and agricultural sectors were identical. A decrease in the services sector's fixed cost decreases wage inequality in the short run if the income share of capital in the agricultural sector is relatively large. Owing to the presence of external economies, a decrease in the services sector's fixed cost increases wage inequality in the long run. A decrease in import duty on the agricultural good increases wage inequality in the short as well as the long run but its effect in the long run is stronger due to the presence of external economies in the industrial sector.