Public education reform: Community or national fundingof education?

I use a political economy model of public fundingof education to evaluate the welfare implications of a move from a community- to a nation-wide fundingpol icy. Broadening the scope of education finance has intragenerational redistribution effects as well as intergenerational effects. Previous studies have emphasized the intragenerational redistribution effects of movingfrom local to state-financed systems, while holdingfact or prices fixed. The model in this paper includes a social security system and allows factor prices to vary endogenously. I examine the welfare effects of broadeningthe scope of financing from a community- to a nation-wide system and find that there are very large welfare gains as voters ‘‘internalize’’ the effect of the education policy on both factor prices and social security benefits. I also focus on the intergenerational distributional effects, finding that significant welfare gains occur despite the displacement of the median voter to an older agent that cares less about children’s well-being.