A test for efficiency in the supply of public education

Abstract

This paper devises and applies a statistical test for efficient provision of local public education. The test is based on the ‘Samuelson condition’ of equality between the sum of marginal rates of substitution and marginal cost. The econometric method is a micro-based approach to the estimation of the marginal rate of substitution function. This method accounts for possible ‘Tiebout bias’ caused by the fact that individuals may choose their school districts in accordance with their tastes for education.