4. Brunner and coauthors (2001) studied home ownership and median incomes in dif

Question

4. Brunner and coauthors (2001) studied home ownership and median incomes in different California communities and their connection with voting on a proposal to promote school choice. At the time, students had to attend school in the district where they lived or else pay for private school. Under the proposal, students could obtain education at any private or public school that had room for them. If they left their own district, then that district would pay the student’s new school what the district would have received if the student had stayed there. If the private school cost more than that, the student would pay the difference. Note that public services such as education are partially capitalized in house prices. What does this fact suggest about the likely net benefits of the proposed plan for homeowners in high income communities compared to home owners in low income communities? What does it suggest about the likely net benefits of the proposed plan for home owners in high income communities compared to renters in those same communities? Explain

Explanation / Answer

Home owners in high income communities: Home owners in high income communities would prefer sending their children to private schools rather than public schools. As a result, they would end up paying the difference in schooling costs of the private and district schools.

Home owners in low income communities: Home owners in low income communities would prefer sending their children to district schools rather than private schools. As a result, they would end up paying nothing and be entitled to free education.

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