The paper analyses disparities in local education expenditures at the settlement and school level n Hungary. It is shown that local average income, which is a major element of the local government budget constraint, has a strong impact on school expenditures, especially in towns. This lack of fiscal neutrality implies that settlements with a higher share of socially disadvantaged children spend somewhat less on education. In case of towns, this between settlement effect is offset by within settlement disparities in expenditures: schools with relatively more disadvantaged pupils tend to have a larger budget compared to other schools of the same town. Considering village and town schools together indicates, that the higher is the share of poor children in a school, the lower are per capita expenditures on average. Though the magnitude of the effect is small, it reveals a fundamental equity problem. While the successful education of disadvantaged pupils might require substantial additional resources, the pubic education system in Hungary can not provide school with these resources now.
School expenditures interjurisdictional disparities wealth neutrality of education expenditures