Robert M. Schwab

Measuring Peer Group Effects: A Study of Teenage Behavior

Individuals or households often have some scope for choice of peer groups, whether through the selection of neighborhood of residence, school, or friends. This study addresses the estimation of peer group effects in cases in which measures of peer group influence are potentially endogenous variables. Using a rich data set on individual behavior, the paper explores teenage pregnancy and school dropout behavior. For both cases, the estimation of a straight-forward single-equation model yields statistically significant peer group effects; however, these effects disappear under simultaneous equation estimation. The results are robust and suggest the need for careful modeling of the choice of peer groups.

Economic competition among jurisdictions: efficiency enhancing or distortion inducing?

Abstract This paper explores the normative implications of competition among ‘local’ jurisdictions to attract new industry and income. Within a neoclassical framework, we examine how local officials set two policy variables, a tax (or subsidy) rate on mobile capital and a standard for local environmental quality, to induce more capital to enter the jurisdiction in order to raise wages. The analysis suggests that, for jurisdictions homogeneous in workers, local choices under simple-majority rule will be socially optimal; such jurisdictions select a zero tax rate on capital and set a standard for local environmental quality such that marginal willingness-to-pay equals the marginal social costs of a cleaner environment. However, in cases where jurisdictions are not homogeneous or where, for various reasons, they set a positive tax rate on capital, distortions arise not only in local fiscal decisions, but also in local environmental choices.

Finishing High School and Starting College: Do Catholic Schools Make a Difference?

In this paper, we consider two measures of the relative effectiveness of public and Catholic schools: finishing high school and starting college. These measures are potentially more important indicators of school quality than standardized test scores in light of the economic consequences of obtaining more education. Single-equation estimates suggest that for the typical student, attending a Catholic high school raises the probability of finishing high school or entering a four-year college by thirteen percentage points. In bivariate probit models we find almost no evidence that our single-equation estimates are subject to selection bias.

Education spending in an aging America

Abstract In this paper we use a national panel of public school districts to study the impact of an aging population on public education spending. In contrast to previous analyses that use state-level data, we find that the elderly have only a modest overall negative effect on education spending at the district level. Our results confirm, however, that a growing share of elderly at the state level tends to depress state spending on education. These results are consistent with the hypothesis that the elderly believe only higher local spending is capitalized into house values.

Schoolhouses, courthouses, and statehouses after Serrano

The constitutionality of public school finance systems has been challenged in 43 states in the 25 years since the landmark Serranodecision. Using data on revenues from more than 16,000 school districts over the 1972-1992 period, this article assesses the impact of court-mandated reform on the role of the states in school finance. We find that resources from the state increased while revenues from local districts were roughly unchanged after successful litigation. States also followed a more aggressive redistribution policy in the aftermath of court-mandated reform; after successful litigation, state aid to the poorest districts increased and aid to the wealthiest districts remained unchanged. Finally, we find that reforms that were initiated by the states without judicial prodding were typically ineffective.

Community composition and the provision of local public goods : A normative analysis

Abstract There is considerable evidence suggesting that the composition of the community – that is, the characteristics of the residents themselves – plays a central role in determining levels of important public outputs such as education and public safety. This paper explores the normative implications of this evidence. We show that optimal community composition involves a trade-off between the gains from homogeneity in demands among residents and the gains from heterogeneity in the production of those goods. The analysis establishes a role for equalizing intergovernmental grants on efficiency grounds: such grants can provide the needed incentives for sustaining heterogeneous communities.

Disentangling the demand function from the production function for local public services: The case of public safety

Abstract In this paper we develop a theoretical framework and an econometric model which allow us to separate the effect of income and other socioeconomic variables on the demand for publicly provided goods from their effect on the price of those goods. We apply our approach in a study of expenditures for police protection in a cross-section of 73 U.S. cities and counties. Our results suggest that studies of public expenditures which fail to incorporate community characteristics in production and cost functions can yield very misleading results.

Consumption Taxes in a Life-Cycle Framework: Are Sin Taxes Regressive?

In this paper we construct measures of tax incidence over the life-cycle and compare these measures to traditional measures based on annual data. We show that annual measures of the incidence of taxes on consumption goods may differ from life-cycle measures for three reasons. First, annual measures of income reflect transitory components which should have smaller effects on consumption than permanent changes in income. Second, income measured in a single period differs from lifetime income due to age-related differences in earnings. Third, consumption of certain items follows life-cycle patterns independent of changes in income. Surprisingly, we find that these effects cause almost no change in the assessment of the incidence of taxes applying to the consumption of cigarettes. For alcohol, however, we find that a tax on its consumption is slightly less regressive when measured with respect to lifetime income than when measured with respect to annual income.

The economics of tax amnesties

Abstract This paper examines some of the economic implications of tax amnesties. We present a model where individuals are initially uncertain about the disutility from tax evasion when they file their tax returns. If they later learn that they would like to be more honest than they have been, an amnesty gives them an opportunity to report additional income. We also show that as the probability of an amnesty rises, people report less income. As a consequence, an optimal collection policy requires the government to balance the cost of lost tax revenue against the gains from an amnesty.

A fiscal federalism approach to infrastructure policy

Abstract This paper presents a fiscal federalism perspective on infrastructure policy. It begins by looking at the theory of fiscal federalism and then turns to the actual division of the responsibility for providing public capital in the United States. The paper then argues that it is difficult to square theory and actual practice: a good case can be made that national infrastructure policy is inconsistent with the principles of fiscal federalism in a number of important respects. The final sections of the paper look at two specific issues in federalism, the tax exempt municipal bond market and interjurisdictional competition.