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Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in USA Biplab Datta Georgia State University November 10, 2016 Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient

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SLIDE 1

Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in USA

Biplab Datta

Georgia State University

November 10, 2016

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 1 / 19

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SLIDE 2

Motivation

Figure: Ozone Pollution and Property Tax Revenue per Pupil in Seattle-Tacoma-Bellevue CBSA, WA

1000 2000 3000 4000 Property tax revenue per pupil (constant $) 90 100 110 120 130 140 Ozone Pollution Level

Property Tax Revenue per Pupil

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 2 / 19

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SLIDE 3

What do I do?

I derive a finance channel of pollution education nexus by extending the education production function framework. I analyze K-12 revenue and expenditure data for metropolitan school districts, and estimate a reduced form model. I use panel fixed effect model for empirical analysis. Unit of analysis: school district level. Sample Period: 1996 to 2008 (3-year intervals).

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 3 / 19

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SLIDE 4

Model

Education Production Function Y = y(H, E, F , S) (1)

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 4 / 19

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SLIDE 5

Model

Education Production Function Y = y(H, E, F , S) (1) Existing Literature Y = y(h(P), E, F, S) (2)

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 4 / 19

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SLIDE 6

Model

Education Production Function Y = y(H, E, F , S) (1) Existing Literature Y = y(h(P), E, F, S) (2) My Contribution Y = y(h(P), e(P), F , S) (3)

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 4 / 19

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SLIDE 7

Model

Property Tax Revenue R = m(V )v(P) (4)

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 5 / 19

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SLIDE 8

Model

Property Tax Revenue R = m(V )v(P) (4) Total differentiating equation (1) yields: dR dP = ( δr δV δv δP + δr δM δm δV δv δP ) (5)

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 5 / 19

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SLIDE 9

Deriving School Finance Channel

Figure: Policy Offsetting Effect

−10 10 20 30

  • Comp. growth rate of property tax revenue

5 10 15 20

  • Comp. growth rate of housing price

Property Tax Rev Housing Price Index

Compound Growth Rate

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 6 / 19

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SLIDE 10

Model

Total differentiating equation (1) yields: dY dP = MPH δh δP + MPE( δr δV δv δP + δr δM δm δV δv δP ) + MPS δs δP (6)

Health Channel: MPH δh

δP

Finance Channel: MPE( δr

δV δv δP + δr δM δm δV δv δP )

Socioeconomic Channel: MPS δs

δP

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 7 / 19

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SLIDE 11

Empirical Model

Current expenditure per pupil: Ejst = γ0 + γ1 ln Pollutionj,s,t−k + γ2 ln Pollutionj,s,t−k2 + State′

st γ3 + αj + λt + ǫjt

(7) State level controls are -

state revenue as percentage of total K-12 revenue, and a state level index for average current expenditure per pupil.

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 8 / 19

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SLIDE 12

Empirical Model

Property tax revenue per pupil: Rjst = β0 + β1 ln Pollutionj,s,t−k + β2 ln Pollutionj,s,t−k2 + State′

st β3 + Local′ j,s,t−k β4 + District′ jst β5

+ β6 HPIs,t−k+1 + αj + λt + ǫjt (8) District includes -

total debt outstanding, and

  • ther local revenue share.

Local includes -

a measure of school quality capital outlay expenditure

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 9 / 19

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SLIDE 13

Empirical Model

Marginal effects: δEjt δ ln Pollutionj,s,t−k = γ1 + 2γ2 ln Pollutionj,s,t−k (9) δRjt δ ln Pollutionj,s,t−k = β1 + 2β2 ln Pollutionj,s,t−k (10)

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 10 / 19

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SLIDE 14

Pollutants and Pollution Measure

Ground level ozone, NO2, PM10, SO2 3-year average annual pollution measure All pollution monitor located within 25 mile radius of the school district centroid, with at least 1 monitor within 12 mile radius. Weighted average of monitor readings, weighted by inverse of distance squared.

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 11 / 19

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SLIDE 15

Results

Current expenditure per pupil marginal effects:

Pollutant Ozone NO2 PM10 SO2

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 12 / 19

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SLIDE 16

Results

Current expenditure per pupil marginal effects:

Pollutant M.E. Ozone 49, 030 − 5, 810 ln(P) NO2 12, 541 − 2, 207 ln(P) PM10 −12, 078 + 1, 659 ln(P) SO2 −4, 446 + 515.2 ln(P)

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 12 / 19

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SLIDE 17

Results

Current expenditure per pupil marginal effects:

Pollutant M.E. 50thPc Value Ozone 49, 030 − 5, 810 ln(P) 4.454 NO2 12, 541 − 2, 207 ln(P) 3.091 PM10 −12, 078 + 1, 659 ln(P) 3.332 SO2 −4, 446 + 515.2 ln(P) 4.094

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 12 / 19

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SLIDE 18

Results

Current expenditure per pupil marginal effects:

Pollutant M.E. 50thPc Value M.E. at 50thPc Ozone 49, 030 − 5, 810 ln(P) 4.454

  • 2,730***

NO2 12, 541 − 2, 207 ln(P) 3.091

  • 896.5**

PM10 −12, 078 + 1, 659 ln(P) 3.332

  • 1,022***

SO2 −4, 446 + 515.2 ln(P) 4.094

  • 193.4*

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 12 / 19

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SLIDE 19

Marginal Effects for Current Expenditure

Figure: Marginal Effects at Different Percentiles

−5000 −4000 −3000 −2000 −1000 1 2 3 4 5 6 7 8 9 Percentiles (’0)

Ozone

(a) Ozone

−4000 −3000 −2000 −1000 1000 1 2 3 4 5 6 7 8 9 Percentiles (’0)

NO2

(b) NO2

−3000 −2000 −1000 1000 1 2 3 4 5 6 7 8 9 Percentiles (’0)

PM10

(c) PM10

−1000 −500 500 1000 1 2 3 4 5 6 7 8 9 Percentiles (’0)

SO2

(d) SO2

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 13 / 19

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SLIDE 20

Change in Pollution and Initial Pollution Level

Figure: Compound Growth Rate of Pollution - 1992 to 2004 and Initial Pollution

−.03 −.02 −.01 .01 .02 Compound growth rate 50 60 70 80 90 100 110 120 Pollution in 1992

Ozone

(a) Ozone

−.06 −.04 −.02 .02 Compound growth rate 5 10 15 20 25 30 35 40 Pollution in 1992

NO2

(b) NO2

−.06 −.04 −.02 .02 Compound growth rate 10 20 30 40 50 Pollution level in 1992

PM10

(c) PM10

−.15 −.1 −.05 .05 .1 Compound growth rate 50 100 150 200 250 300 350 400 Pollution level in 1992

SO2

(d) SO2

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 14 / 19

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SLIDE 21

Results

Current expenditure per pupil transmission channel:

Pollutant Ozone NO2 PM10 SO2

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 15 / 19

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SLIDE 22

Results

Current expenditure per pupil transmission channel:

Pollutant Original Ozone

  • 2,730***

NO2

  • 896.5**

PM10

  • 1,022***

SO2

  • 193.4*

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 15 / 19

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SLIDE 23

Results

Current expenditure per pupil transmission channel:

Pollutant Original State Rev Control Ozone

  • 2,730***
  • 2,667***

NO2

  • 896.5**
  • 958.6***

PM10

  • 1,022***
  • 825.5***

SO2

  • 193.4*
  • 121.8

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 15 / 19

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SLIDE 24

Results

Current expenditure per pupil transmission channel:

Pollutant Original State Rev Control Property Tax Rev Control Ozone

  • 2,730***
  • 2,667***
  • 1,712***

NO2

  • 896.5**
  • 958.6***

186.6 PM10

  • 1,022***
  • 825.5***
  • 664.6***

SO2

  • 193.4*
  • 121.8
  • 124.8

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 15 / 19

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SLIDE 25

Results

Property tax revenue per pupil marginal effects:

Pollutant Ozone NO2 PM10 SO2

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 16 / 19

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SLIDE 26

Results

Property tax revenue per pupil marginal effects:

Pollutant M.E. Ozone 40, 600 − 4, 791 ln(P) NO2 12, 401 − 2, 411 ln(P) PM10 −7, 870 + 1, 125 ln(P) SO2 −2, 301 + 260.9 ln(P)

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 16 / 19

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SLIDE 27

Results

Property tax revenue per pupil marginal effects:

Pollutant M.E. 50thPc Value Ozone 40, 600 − 4, 791 ln(P) 4.454 NO2 12, 401 − 2, 411 ln(P) 3.091 PM10 −7, 870 + 1, 125 ln(P) 3.332 SO2 −2, 301 + 260.9 ln(P) 4.094

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 16 / 19

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SLIDE 28

Results

Property tax revenue per pupil marginal effects:

Pollutant M.E. 50thPc Value M.E. at 50thPc Ozone 40, 600 − 4, 791 ln(P) 4.454

  • 2,083***

NO2 12, 401 − 2, 411 ln(P) 3.091

  • 2,278***

PM10 −7, 870 + 1, 125 ln(P) 3.332

  • 375.6*

SO2 −2, 301 + 260.9 ln(P) 4.094

  • 147.6

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 16 / 19

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SLIDE 29

Marginal Effects for Property Tax Revenue

Figure: Marginal Effects at Different Percentiles

−4000 −3000 −2000 −1000 1 2 3 4 5 6 7 8 9 Percentiles (’0)

Ozone

(a) Ozone

−5000 −4000 −3000 −2000 −1000 1 2 3 4 5 6 7 8 9 Percentiles (’0)

NO2

(b) NO2

−2000 −1000 1000 1 2 3 4 5 6 7 8 9 Percentiles (’0)

PM10

(c) PM10

−1000 −500 500 1 2 3 4 5 6 7 8 9 Percentiles (’0)

SO2

(d) SO2

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 17 / 19

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SLIDE 30

Robustness Check

State-year fixed effect and state specific linear time trend. Regression weighted by number of students. Multiple pollutants. Different sample interval and different lag period. Geographic cost difference. CBSA relative pollution measure.

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 18 / 19

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SLIDE 31

Summary

School resources have effects on student achievements. Distribution of school resources in depends on property tax revenue. Property values affect property tax revenue collection. Pollution level affects property values. Hence, school resources are affected by pollution. For a median school district with around 3880 students, this accounts for around 442,000 dollars a year.

Biplab Datta (Georgia State University) Is There A School Finance Channel? Effects of Ambient Air Pollution on K-12 Education in November 10, 2016 19 / 19