More than half of the variation across U.S. school districts in real K-12 education expenditures per student is due to differences between, rather than within, states. I study the welfare implications of redistribution of education expenditures by the Federal government, using an analytically tractable model of human capital accumulation with heterogeneous agents and endogenous state policies. The net welfare effect of Federal redistribution depends on a trade-off between the positive effect of redistributing resources toward poorer states and the negative effect resulting from misallocation of population across states. Federal redistribution increases welfare in a calibrated version of the model.
E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
H70: State and Local Government; Intergovernmental Relations: General
I20: Education and Research Institutions: General
J60: Mobility, Unemployment, and Vacancies: General