The Impact of Direct Democracy on Society - Universität St.Gallen

– 208 –2.3 U.S. Empirical Evidence on Public SchoolingIn the last two decades, so-called tax revolts – for example, California's famous Proposition13 in 1978 – have taken place in about 20 U.S. states 228 , pushed through by means <strong>of</strong> directlegislation, particularly statutory initiatives at the state level 229 . <strong>The</strong>se revolts aim mostly atreducing the level and growth <strong>of</strong> property taxes 230 that create important revenue at the locallevel (CARD and PAYNE 2002, DOWNES et al. 1998, DYE and MCGUIRE 1997). <strong>The</strong>refore,such a change has a direct negative effect on school budgets (BRADBURY et al. 2001,SHADBEGIAN 2003) that does not necessarily translate into an equally large cut (in relativeterms) in the teaching and administration components <strong>of</strong> school spending (e.g. DYE andMCGUIRE 1997), particularly if, as in the U.S., the administrative body <strong>of</strong> a school has thepower to allocate financial resources quite autonomously (FIGLIO 1997).During the 1990s, empirical multivariate analyses <strong>of</strong> the impact <strong>of</strong> newly introduced tax limitson student performance were carried out to test an educational production function 231 . In across-state analysis using individual data, FIGLIO (1997) finds a substantially loweringinfluence <strong>of</strong> tax limits on student performance – particularly on science, social studies, andreading examinations – but less robust results for mathematics. Using individual data,DOWNEs and FIGLIO (1997) again find a sizeable and significant decline in statewide meanstudent performance in states with a tax limit compared to states without such a limit inmathematics but not in reading. A contradictory finding is reported by DOWNES et al. (1998)in an analysis <strong>of</strong> the effect <strong>of</strong> a local property tax cap on student performance in elementaryschools in the Chicago metropolitan area. <strong>The</strong> authors find only a weak and small negativeimpact on student performance in mathematics and no effect on reading test scores. Oneexplanation for this contradictory finding may be that, because affected and unaffected schooldistricts were in close proximity to each other, these neighborhood schools constituted asingle supply <strong>of</strong> public schooling for their inhabitants, which created strong competition. Thiscompetition between schools is conjectured to have mitigated the otherwise detrimentalimpact <strong>of</strong> tax limits (DOWNES and FIGLIO 1999, HOXBY 2000) and to have restricted the rentseekingbehavior by bureaucrats (DYE and MCGUIRE 1997, FIGLIO and O’SULLIVAN 2001).228 <strong>The</strong> source ACIR (1995) provides a catalogue <strong>of</strong> existing tax limits.229 A brief overview <strong>of</strong> the theoretical background <strong>of</strong> this development can be found in DOWNES and FIGLIO(1997).230 See FIGLIO and RUEBEN (2001), FIGLIO (1997), DOWNES and FIGLIO (1997)231 Earlier contributions to this topic from the 1970s until the very early 1990s, some empirical but mostinformal, are described in DOWNES and FIGLIO (1999). <strong>The</strong>se contributions, however, suffer frommethodological shortcomings.