Prior work uses a parametric approach to study the distributional effects of school finance reform and finds evidence that reform yields greater equality of school expenditures by lowering spending in high-spending districts (leveling down) or increasing spending in low-spending districts (leveling up). We develop a kernel density difference-in-difference approach to isolate how tax limits and/or education finance reform affect the full distribution of education expenditures. Simulations of the difference in distributional differences across school finance regimes over time suggest that parametric approaches offer an incomplete description of the distributional impacts of policy changes. Using data for the population of U.S. school districts in 1972, 1982, and 1992, we find that educational reforms and tax limits yield greater equality of expenditures by reducing the number of districts in the tails of the distribution, particularly when both are adopted during the same decade. Our results also suggest that the incompleteness of the parametric descriptions used in prior work can suggest greater variation in the distributional consequences of reform than is actually present.

Using new institutional-level data, we assess the impact of changing federal aid levels on institutional-level Pell revenues. Using various policy instruments associated with Pell generosity, we quantify the sensitivity of institutional Pell revenues to the generosity of the Pell Grant program. In general, we find an elastic response of institutional Pell revenues with respect to the maximum Pell award, where other policy instruments associated with Pell generosity are found to have an inelastic or zero impact. We also document significant asymmetries across institutional selectivity, both in magnitude and in terms of which channel accounts for the measured sensitivity—award values directly or institutional enrollment. In the end, exogenous changes in the federal Pell Grant program are found to correlate strongly with changes in the distribution of needy students and revenues across institutional quality.