The Economic Efficiency of Mixed Financing of Education in Economic Space

Abstract

The major purpose of this paper is to compare spatial models of two alternative systems of public support for primary and secondary education in terms of economic efficiency: the nationalized system and the mixed financing system. The nationalized system is defined as a public school system in which an equal quantity of education of homogeneous quality is offered to all students at designated attendance centers. The mixed financing system is defined as one in which households may utilize either public or private schools, with the community providing a voucher equal in value to the cost of providing public education to those households which desire to utilize private schools. The expected result of greater efficiency for the mixed financing model breaks down in economic space because of diseconomies inherent in the spatial model which are absent in the nonspatial model. We find that lower-income households or the community suffer a reduction in welfare as a result of a change to the mixed financing system, while higher-income households experience a smaller gain than they would under a nonspatial model. Whether or not the mixed financing system results in a welfare gain for the community becomes an open question which requires interpersonal utility comparisons to answer.