School Finance Reform: Assessing General Equilibrium Effects

In 1994 the state of Michigan implemented one of the most comprehensive school finance reforms undertaken to date in any of the states. Understanding the effects of the reform is thus of value in informing other potential reform initiatives. In addition, the reform and associated changes in the economic environment provide an opportunity to assess whether a simple general equilibrium model can be of value in framing the study of such reform initiatives. In this paper, the authors present and use such a model to derive predictions about the effects of the reform on housing prices and neighborhood demographic compositions.