This paper develops a model of public exchange whereby voters and education policy makers exchange with one another within school districts. Because school district consolidation lowers alternatives to voters-parents , consolidation is hypothesized to raise public education spending because weakened intergovernmenta l competition allows policy makers to promote their own utility, rather than that of constituents. Models of public education spending and academic performance are estimated over 1988Ð 1990. While evidence indicates little support for the traditional treatment of the Leviathan hypothesis that greater competition lowers public spending, this paper argues that education spending by itself does not fully provide a valid test of the Leviathan hypothesis since spending, by itself, does not necessarily indicate the quality of public education programmes. Empirical evidence indicates that greater numbers of schools and school districts promote higher student achievement as evidenced by higher math and verbal SAT scores, math pro® ciency of 8th graders, and lower high school drop-out rates. Evidence therefore suggests that, while greater numbers of school districts and schools are, to some degree, associated with higher public education spending, higher student achievement appears to follow as well.
I . I N T R O D U C T I O NUnited States. The ® rst arises because public schools pro vide 90% of primary and secondary education and therefore There is growing perception that the educational system of crowd-out private schools that otherwise might inject the United States is in decline and, because the public sector greater competition into the education market. Parents is the dominant supplier of education, criticism naturally must pay twice for education when they send children to focuses on the public school system. While it is often argued private schools since payments for public schools are not that spending has declined, public education spending voluntary. School choice policies are aimed at curtailing the (1989Ð 90 dollars) per pupil rose 74% from 1960 to 1992, or public education monopoly because they provide public from roughly $2979 to $5196.1 Despite this spending infunds for parents who choose private schools for their crease, combined SAT (Student Achievement Test) scores children.3 Until widespread support for such policies arises, fell 5.2%, or from 948 to 899 over this same period. 2 the public education sector will likely remain insulated from Two structural characteristics describe the delivery of private competition. The second characteristic follows from primary and secondary levels of public education in the dramatic reduction in numbers of public school districts: Friedman (1962) was an early supporter of such policies. Couch, Shughart and Williams (1993) conclude that school vouchers would create a more competitive environment between private and public schools and therefore improve public school quality because higher competition for students is shown to foster higher educational qual...