The impacts of education spending and finance reform on manufacturing property shadow values: a cost function approach

Abstract

The effects of court-ordered education finance reform on property values and residential choice have received increasing attention in recent years (Fischel 2001). However, little attention has been focused on the effects of education finance reform on manufacturing sector property values within an optimizing framework. This is pursued here by modeling education expenditures and education finance reform as “free” variables to manufacturing firms in a cost function model together with input demand equations. This framework is applied to panel data on manufacturers’ capital (building and structures) stocks for the 48 continental US for 1982–1996 to estimate implicit (shadow) values to the manufacturing sector of education spending and school finance reform. On average, school finance reform lowers the implicit value of manufacturing firms’ stock of buildings and structures capital, while greater education spending lowers manufacturing variable costs.