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Teacher hiring decisions: How do governments react to an exogenous redistribution of education funds?

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  • Cruz, Tassia

Abstract

This paper examines the teacher hiring decisions of Brazilian local governments in response to an education funding reform, called FUNDEF. The reform redistributed funding across municipalities and determined a minimum spending on teachers. While several papers have already examined the overall effect of the FUNDEF reform, this is the first analysis of the effects of the municipalities’ relative positions after the redistribution on hiring decisions. Using a simulated difference-in-differences model, I find that FUNDEF only led to salary increases in municipalities that benefited from the redistribution. Contrary to its initial goal, municipalities harmed by the redistribution responded by increasing hiring. Additionally, employing a simulated instrumental-variable model, I find that the amount received in FUNDEF transfers did not lead to pay increases. Models of government-union interaction are used to explain these results, suggesting that the bargaining power is the main driver of teacher pay.

Suggested Citation

  • Cruz, Tassia, 2018. "Teacher hiring decisions: How do governments react to an exogenous redistribution of education funds?," Economics of Education Review, Elsevier, vol. 67(C), pages 58-81.
    • Handle: RePEc:eee:ecoedu:v:67:y:2018:i:c:p:58-81
    DOI: 10.1016/j.econedurev.2018.09.002
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    Cited by:

    1. Cruz, Tassia & Silva, Talita, 2020. "Minimum Spending in Education and the Flypaper Effect," Economics of Education Review, Elsevier, vol. 77(C).
    2. Gunes, Pinar Mine & Tsaneva, Magda, 2022. "The Effect of Brazil's Family Health Program on Cognitive Skills," IZA Discussion Papers 15784, Institute of Labor Economics (IZA).
    3. Greaves, Ellen & Sibieta, Luke, 2019. "Constrained optimisation? Teacher salaries, school resources and student achievement," Economics of Education Review, Elsevier, vol. 73(C).

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    More about this item

    Keywords

    Teacher salaries; Educational finance; Teacher hiring; Redistribution of funds; Local government expenditure; Bargaining power;
    All these keywords.

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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