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Microdata estimation of school expenditure levels: An alternative to the median voter approach

Author

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  • John Akin
  • Michael Lea
Abstract
The main purpose of this paper has been to present an alternative approach to estimating individual demand for a local public good; in this case, education. Most empirical studies of the private demand for public goods utilize the median voter framework for preference aggregation to justify the use of median values over geographical areas for the independent variables in the estimation. However, the median voter approach assumes that voter characteristics are well represented by population characteristics and that median or mean values on all independent variables can be used to describe accurately the fictional median voter. We cannot know whether the crucial voter has the median income level or other median characteristics. With the median framework we also have great difficulty in specification of a model containing household characteristics. As an alternative, this paper utilizes actual household observations from a large random sample data set for the independent variables in the estimation. While we have no way of ascertaining whether the observations in our sample are in equilibrium or are for the crucial voters in their jurisdictions, the same problems exist for the median voter representation. We can, however, know that the results are statistically reasonable and that specification and simultaneity problems are greatly reduced relative to the median voter approach. In comparing the results from the two samples, we found major differences in the coefficient estimates and in the degrees of significance of the individual ‘taste’ variables. In particular, income is insignificant in the disaggregate estimation while it is significant and positive in sign when median income is used as as the explanatory variable. Because so many studies have purported to estimate the income elasticity of public good demand, these findings, using an alternative approach, are quite important. Likewise, differences in the significance and direction of effect for number of children (particularly when the squared term is added to the specification) and age and schooling of the head of household appear between the alternative estimations. Many of the problems with the median approach are largely statistical, since the use of averages can result in aggregation bias, in the picking up of external influences unconnected to the hypothesized relationships, in simultaneous equation bias and in specification related problems. The specification problems are particularly troublesome because the high level of interrelation between the aggregate proxies makes the results extremely sensitive to model specification. Changes in the model specification lead to vastly different results in the Aggregate estimation, whereas the disaggregate results are more stable. The sensitivity of the aggregate estimates leads to problems in both the confidence in and correct interpretation of aggregate estimation results from the median voter model. These results are consistent with the premise that individuals make choices about levels of public good consumption, such as education, in a similar manner to that in which they choose their private good consumption. However, these results do not indicate who the pivotal voter is or whether that voter received his or her desired level of services. The use of disaggregate data obviates the need to assume a pivotal voter within a jurisdiction. The use of such data also allows for a less arbitrary and more precise specification of the theoretical median voter model and should be the preferred alternative when the characteristics of actual voters are unknown. Copyright Martinus Nijhoff Publishers 1982

Suggested Citation

  • John Akin & Michael Lea, 1982. "Microdata estimation of school expenditure levels: An alternative to the median voter approach," Public Choice, Springer, vol. 38(2), pages 113-128, January.
    • Handle: RePEc:kap:pubcho:v:38:y:1982:i:2:p:113-128
    DOI: 10.1007/BF00127713
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    References listed on IDEAS

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    1. Bergstrom, Theodore C & Goodman, Robert P, 1973. "Private Demands for Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 280-296, June.
    2. Borcherding, Thomas E & Deacon, Robert T, 1972. "The Demand for the Services of Non-Federal Governments," American Economic Review, American Economic Association, vol. 62(5), pages 891-901, December.
    3. Akin, John S & YoungDay, Douglas J, 1976. "The Efficiency of Local School Finance," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 255-258, May.
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    5. Stiglitz, J. E., 1974. "The demand for education in public and private school systems," Journal of Public Economics, Elsevier, vol. 3(4), pages 349-385, November.
    6. Rubinfeld, Daniel L, 1977. "Voting in a Local School Election: A Micro Analysis," The Review of Economics and Statistics, MIT Press, vol. 59(1), pages 30-42, February.
    7. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65(2), pages 135-135.
    8. Ohls, James C & Wales, Terence J, 1972. "Supply and Demand for State and Local Services," The Review of Economics and Statistics, MIT Press, vol. 54(4), pages 424-430, November.
    9. Lovell, Michael C, 1978. "Spending for Education: The Exercise of Public Choice," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 487-495, November.
    10. McKelvey, Richard D., 1976. "Intransitivities in multidimensional voting models and some implications for agenda control," Journal of Economic Theory, Elsevier, vol. 12(3), pages 472-482, June.
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    12. Howard R. Bowen, 1943. "The Interpretation of Voting in the Allocation of Economic Resources," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 58(1), pages 27-48.
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    Cited by:

    1. Caroline M. Hoxby, 2000. "Does Competition among Public Schools Benefit Students and Taxpayers?," American Economic Review, American Economic Association, vol. 90(5), pages 1209-1238, December.
    2. Stair, Anthony & Rephann, Terance J. & Heberling, Matt, 2006. "Demand for public education: Evidence from a rural school district," Economics of Education Review, Elsevier, vol. 25(5), pages 521-531, October.
    3. Rodney Fort, 1988. "The median voter, setters, and non-repeated construction bond issues," Public Choice, Springer, vol. 56(3), pages 213-231, March.
    4. Richard J. Cebula & Joshua C. Hall & Maria Y. Tackett, 2017. "Non-public competition and public school performance: evidence from West Virginia," Applied Economics, Taylor & Francis Journals, vol. 49(12), pages 1185-1193, March.
    5. Edward J. Mathis & Charles E. Zech, 1985. "The Community Demand for Police Officers," American Journal of Economics and Sociology, Wiley Blackwell, vol. 44(4), pages 401-410, October.

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