We present an equilibrium model of the market for higher education. Our model simultaneously pred... more We present an equilibrium model of the market for higher education. Our model simultaneously predicts student selection into institutions of higher education, financial aid, educational expenditures, and educational outcomes. We show that the model gives rise to a strict hierarchy of colleges that differ by the educational quality provided to the students. We also develop a new estimation procedure that exploits the observed variation in prices within colleges. Identification is based on variation in endowments and technology. It does not rely on observed variation in potentially endogenous characteristics of colleges such as peer quality measures and expenditures.
show equilibrium provision of education by public and private schools has the latter skim off the... more show equilibrium provision of education by public and private schools has the latter skim off the wealthiest and most-able students, and flat-rate vouchers lead to further cream skimming. Here we study voucher design that would inject private-school competition and increase technical efficiencies without cream skimming. Conditioning vouchers on student ability without restriction on participating schools' policies fails to effect significantly cream skimming. However, by adding conditions like tuition constraints such as vouchers can reap the benefits of school competition without increased stratification. This can be accomplished while allowing voluntary participation in the voucher system and without tax increases.
In this paper we study the life cycle locational choices of heterogeneous households and characte... more In this paper we study the life cycle locational choices of heterogeneous households and characterize the dynamics of metropolitan areas. We develop an overlapping genera- tions model for households in of a system of multiple jurisdictions. At each point of time households choose among the finite number of jurisdictions, pick consumption and housing plans, and vote over education expenditures and tax policies. A household’s composition changes over the life cycle as children grow up and leave the household. These changes in turn impact the household’s need for housing and for local public ser- vices, particularly education. Households face frictions in relocating. A household may relocate as needs change, bearing the associated financial and psychic costs of moving. Alternatively, the household may choose to remain in a community that suited its initial needs, finding the costs of relocation to be greater than the potential benefits of moving to a community better suited to its chan...
Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears... more Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission.
We examine the practice of affirmative action and consequences of its proscription on the admissi... more We examine the practice of affirmative action and consequences of its proscription on the admission and tuition policies of institutions of higher education in a general equilibrium framework. Colleges are differentiated ex ante by endowments and compete for students that differ by race, household income, and academic qualification. Colleges maximize a quality index that is increasing in mean academic ability of students, educational resources per student, an income-diversity measure, and a racial-diversity measure. Proscription of affirmative action requires that admission and tuition policies are race blind. Colleges then use the informational content about race in income and academic ability in reformulating their optimal policies. Finally, we examine "racial profiling" as an alternative explanation for college admission policies that weigh race.
Households choose a community in a metropolitan area and collectively set a minimum housing quali... more Households choose a community in a metropolitan area and collectively set a minimum housing quality and a property tax to finance a local public good. The collective imposition of a lower bound on housing consumption induces an incomestratified equilibrium in a specification where meaningful community differentiation would not arise without zoning. We show computationally that zoning restrictions are likely to be stringent, with a majority facing a binding constraint in communities that permit it. By inducing a stratified equilibrium, zoning causes Tiebout-welfare gains in aggregate but with large welfare transfers. Relative to stratified equilibrium without zoning, the zoning equilibrium is significantly more efficient as it reduces housingmarket distortions. * We thank two anonymous referees for very valuable comments and the National Science Foundation and the MacArthur Foundation for financial support. Any errors are ours.
Public provision of a service coexists with private market provision. The quality of public provi... more Public provision of a service coexists with private market provision. The quality of public provision is determined by majority vote. Preferences are not single peaked owing to the presence of private alternatives. We identify two cases. In one, majority voting equilibrium always exists and the median-income vote= is pivotal. In the other, a necessary condition for equilibrium identifies the pivotal voter who must have income below the median. When equilibrium exists, a coalition of middleincome househo!ds who consume the public alternative will be opposed by a coalition of rich and poor households, with the rich choosing private consumptiun.
We study the intergenerational conflict over the provision of public education. This conflict ari... more We study the intergenerational conflict over the provision of public education. This conflict arises because older households without children have weaker incentives to support the provision of high quality educational services in a community than younger household with school-age children. We develop an overlapping generations model for households in a system of multiple jurisdictions. This model captures the differences in preferred policies over the life-cycle. We show that the observed inequality in educational policies across communities is not only the outcome of stratification by income, but is also determined by the stratification by age and a political process that is dominated by older voters in many urban communities with low quality of educational services. The mobility of older households creates a positive fiscal externality since it creates a larger tax base per student. This positive tax externality can dominate the negative effects that arise because older households tend to vote for lower educational expenditures. As a consequence sorting by age can reduce the inequality in educational outcomes that is driven by income sorting.
Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears... more Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission.
The paper examines the practice of affirmative action and consequences of its proscription on the... more The paper examines the practice of affirmative action and consequences of its proscription on the admission and tuition policies of institutions of higher education in a general equilibrium. Colleges are differentiated ex ante by endowments and compete for students that differ by race, household income, and academic qualification. Colleges maximize a quality index that is increasing in mean academic score of students, educational resources per student, an income-diversity measure, and a racial-diversity measure. The pool of potential nonwhite students has distribution of income and academic score with lower means than that of whites. In benchmark equilibrium, colleges may condition admission and tuition on race. In a computational model calibrated using estimates from related research, equilibrium has colleges offer tuition discounts and admission preference to nonwhites to promote racial diversity. Equilibrium entails a quality hierarchy of colleges, so the model predicts practices and characteristics of colleges along the hierarchy. Proscription of affirmative action requires that admission and tuition policies are race blind. Colleges then use the informational content about race in income and academic score in reformulating their optimal policies. Admission and tuition policies are substantially modified in equilibrium of the computational model, and both races are significantly affected. Representation of nonwhites falls significantly in all colleges. The drop is particularly pronounced in the top third of the quality hierarchy of colleges.
show equilibrium provision of education by public and private schools has the latter skim off the... more show equilibrium provision of education by public and private schools has the latter skim off the wealthiest and most-able students, and flat-rate vouchers lead to further cream skimming. Here we study voucher design that would inject private-school competition and increase technical efficiencies without cream skimming. Conditioning vouchers on student ability without restriction on participating schools' policies fails to effect significantly cream skimming. However, by adding conditions like tuition constraints such as vouchers can reap the benefits of school competition without increased stratification. This can be accomplished while allowing voluntary participation in the voucher system and without tax increases.
We present an equilibrium model of the market for higher education. Our model simultaneously pred... more We present an equilibrium model of the market for higher education. Our model simultaneously predicts student selection into institutions of higher education, financial aid, educational expenditures, and educational outcomes. We show that the model gives rise to a strict hierarchy of colleges that differ by the educational quality provided to the students. We also develop a new estimation procedure that exploits the observed variation in prices within colleges. Identification is based on variation in endowments and technology. It does not rely on observed variation in potentially endogenous characteristics of colleges such as peer quality measures and expenditures.
show equilibrium provision of education by public and private schools has the latter skim off the... more show equilibrium provision of education by public and private schools has the latter skim off the wealthiest and most-able students, and flat-rate vouchers lead to further cream skimming. Here we study voucher design that would inject private-school competition and increase technical efficiencies without cream skimming. Conditioning vouchers on student ability without restriction on participating schools' policies fails to effect significantly cream skimming. However, by adding conditions like tuition constraints such as vouchers can reap the benefits of school competition without increased stratification. This can be accomplished while allowing voluntary participation in the voucher system and without tax increases.
In this paper we study the life cycle locational choices of heterogeneous households and characte... more In this paper we study the life cycle locational choices of heterogeneous households and characterize the dynamics of metropolitan areas. We develop an overlapping genera- tions model for households in of a system of multiple jurisdictions. At each point of time households choose among the finite number of jurisdictions, pick consumption and housing plans, and vote over education expenditures and tax policies. A household’s composition changes over the life cycle as children grow up and leave the household. These changes in turn impact the household’s need for housing and for local public ser- vices, particularly education. Households face frictions in relocating. A household may relocate as needs change, bearing the associated financial and psychic costs of moving. Alternatively, the household may choose to remain in a community that suited its initial needs, finding the costs of relocation to be greater than the potential benefits of moving to a community better suited to its chan...
Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears... more Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission.
We examine the practice of affirmative action and consequences of its proscription on the admissi... more We examine the practice of affirmative action and consequences of its proscription on the admission and tuition policies of institutions of higher education in a general equilibrium framework. Colleges are differentiated ex ante by endowments and compete for students that differ by race, household income, and academic qualification. Colleges maximize a quality index that is increasing in mean academic ability of students, educational resources per student, an income-diversity measure, and a racial-diversity measure. Proscription of affirmative action requires that admission and tuition policies are race blind. Colleges then use the informational content about race in income and academic ability in reformulating their optimal policies. Finally, we examine "racial profiling" as an alternative explanation for college admission policies that weigh race.
Households choose a community in a metropolitan area and collectively set a minimum housing quali... more Households choose a community in a metropolitan area and collectively set a minimum housing quality and a property tax to finance a local public good. The collective imposition of a lower bound on housing consumption induces an incomestratified equilibrium in a specification where meaningful community differentiation would not arise without zoning. We show computationally that zoning restrictions are likely to be stringent, with a majority facing a binding constraint in communities that permit it. By inducing a stratified equilibrium, zoning causes Tiebout-welfare gains in aggregate but with large welfare transfers. Relative to stratified equilibrium without zoning, the zoning equilibrium is significantly more efficient as it reduces housingmarket distortions. * We thank two anonymous referees for very valuable comments and the National Science Foundation and the MacArthur Foundation for financial support. Any errors are ours.
Public provision of a service coexists with private market provision. The quality of public provi... more Public provision of a service coexists with private market provision. The quality of public provision is determined by majority vote. Preferences are not single peaked owing to the presence of private alternatives. We identify two cases. In one, majority voting equilibrium always exists and the median-income vote= is pivotal. In the other, a necessary condition for equilibrium identifies the pivotal voter who must have income below the median. When equilibrium exists, a coalition of middleincome househo!ds who consume the public alternative will be opposed by a coalition of rich and poor households, with the rich choosing private consumptiun.
We study the intergenerational conflict over the provision of public education. This conflict ari... more We study the intergenerational conflict over the provision of public education. This conflict arises because older households without children have weaker incentives to support the provision of high quality educational services in a community than younger household with school-age children. We develop an overlapping generations model for households in a system of multiple jurisdictions. This model captures the differences in preferred policies over the life-cycle. We show that the observed inequality in educational policies across communities is not only the outcome of stratification by income, but is also determined by the stratification by age and a political process that is dominated by older voters in many urban communities with low quality of educational services. The mobility of older households creates a positive fiscal externality since it creates a larger tax base per student. This positive tax externality can dominate the negative effects that arise because older households tend to vote for lower educational expenditures. As a consequence sorting by age can reduce the inequality in educational outcomes that is driven by income sorting.
Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears... more Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission.
The paper examines the practice of affirmative action and consequences of its proscription on the... more The paper examines the practice of affirmative action and consequences of its proscription on the admission and tuition policies of institutions of higher education in a general equilibrium. Colleges are differentiated ex ante by endowments and compete for students that differ by race, household income, and academic qualification. Colleges maximize a quality index that is increasing in mean academic score of students, educational resources per student, an income-diversity measure, and a racial-diversity measure. The pool of potential nonwhite students has distribution of income and academic score with lower means than that of whites. In benchmark equilibrium, colleges may condition admission and tuition on race. In a computational model calibrated using estimates from related research, equilibrium has colleges offer tuition discounts and admission preference to nonwhites to promote racial diversity. Equilibrium entails a quality hierarchy of colleges, so the model predicts practices and characteristics of colleges along the hierarchy. Proscription of affirmative action requires that admission and tuition policies are race blind. Colleges then use the informational content about race in income and academic score in reformulating their optimal policies. Admission and tuition policies are substantially modified in equilibrium of the computational model, and both races are significantly affected. Representation of nonwhites falls significantly in all colleges. The drop is particularly pronounced in the top third of the quality hierarchy of colleges.
show equilibrium provision of education by public and private schools has the latter skim off the... more show equilibrium provision of education by public and private schools has the latter skim off the wealthiest and most-able students, and flat-rate vouchers lead to further cream skimming. Here we study voucher design that would inject private-school competition and increase technical efficiencies without cream skimming. Conditioning vouchers on student ability without restriction on participating schools' policies fails to effect significantly cream skimming. However, by adding conditions like tuition constraints such as vouchers can reap the benefits of school competition without increased stratification. This can be accomplished while allowing voluntary participation in the voucher system and without tax increases.
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