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Do School Spending Cuts Matter? Evidence from the Great Recession

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  • C. Kirabo Jackson
  • Cora Wigger
  • Heyu Xiong

Abstract

During the Great Recession, national public school per-pupil spending fell by roughly 7 percent and persisted beyond the recovery. The impact of such large and sustained education funding cuts is not well understood. To examine this, first, we document that the recessionary drop in spending coincided with the end of decades-long national growth in both test scores and college-going. Next, we show that this stalled educational progress was particularly pronounced in states that experienced larger recessionary budget cuts for plausibly exogenous reasons. To isolate budget cuts that were unrelated to (i) other ill-effects of the recession or (ii) endogenous state policies, we use states' historical reliance on state-appropriated funds (which are more sensitive to the business cycle) to fund public schools interacted with the timing of the recession as instruments for reductions in school spending. Cohorts exposed to these spending cuts had lower test scores and lower college-going rates. The spending cuts led to larger test score gaps by income and race.

Suggested Citation

  • C. Kirabo Jackson & Cora Wigger & Heyu Xiong, 2021. "Do School Spending Cuts Matter? Evidence from the Great Recession," American Economic Journal: Economic Policy, American Economic Association, vol. 13(2), pages 304-335, May.
    • Handle: RePEc:aea:aejpol:v:13:y:2021:i:2:p:304-35
    DOI: 10.1257/pol.20180674
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    Citations

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    Cited by:

    1. Danielle V. Handel & Eric A. Hanushek, 2023. "Contexts of Convenience: Generalizing from Published Evaluations of School Finance Policies," CESifo Working Paper Series 10664, CESifo.
    2. Alex Hollingsworth & Mike Huang & Ivan J. Rudik & Nicholas J. Sanders, 2020. "A Thousand Cuts: Cumulative Lead Exposure Reduces Academic Achievement," NBER Working Papers 28250, National Bureau of Economic Research, Inc.
    3. Josh B. McGee, 2023. "Yes, money matters, but the details can make all the difference," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(4), pages 1125-1132, September.
    4. Wedel, Katharina, 2021. "Instruction time and student achievement: The moderating role of teacher qualifications," Economics of Education Review, Elsevier, vol. 85(C).
    5. C. Kirabo Jackson & Claudia Persico, 2023. "Point column on school spending: Money matters," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(4), pages 1118-1124, September.
    6. Brunner, Eric & Hoen, Ben & Hyman, Joshua, 2022. "School district revenue shocks, resource allocations, and student achievement: Evidence from the universe of U.S. wind energy installations," Journal of Public Economics, Elsevier, vol. 206(C).
    7. Wall, Howard J., 2022. "Student Outcomes and Spending on Teachers in the Aftermath of Recession," MPRA Paper 113440, University Library of Munich, Germany.
    8. Caterina Pavese & Enrico Rubolino, 2022. "Austerity Harmed Student Achievement," Cahiers de Recherches Economiques du Département d'économie 22.09, Université de Lausanne, Faculté des HEC, Département d’économie.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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