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The Impact of Internet Subsidies in Public Schools

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  • Austan Goolsbee
  • Jonathan Guryan

Abstract

In an effort to alleviate the perceived growth of a digital divide, the U.S. government enacted a major subsidy for Internet and communications investment in schools starting in 1998. In this paper, we evaluate the effect of the subsidy-known as the E-Rate-on Internet investment in California public schools. The program subsidized spending by 20%-90%, depending on school characteristics. Using new data on school technology usage in every school in California from 1996 to 2000 as well as application data from the E-Rate program, the results indicate that the subsidy did succeed in significantly increasing Internet investment. The implied first-dollar price elasticity of demand for Internet investment is between - 0.4 and - 1.1 and the greatest sensitivity is seen among urban schools and schools with large black and Hispanic student populations. Rural and predominantly white and Asian schools show much less sensitivity. Overall, by the final year of the sample, there were approximately 68% more Internet-connected classrooms per teacher than there would have been without the subsidy. Using a variety of test score results, however, we do not find significant effects of the E-Rate program, at least so far, on student performance. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 88 (2006)
Issue (Month): 2 (May)
Pages: 336-347

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Handle: RePEc:tpr:restat:v:88:y:2006:i:2:p:336-347

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Web page: http://mitpress.mit.edu/journals/

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  1. Angrist, Joshua & Lavy, Victor, 2001. "New Evidence on Classroom Computers and Pupil Learning," IZA Discussion Papers 362, Institute for the Study of Labor (IZA).
  2. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-59, July.
  3. Wolak, Frank A., 1996. "Can universal service survive in a competitive telecommunications environment? Evidence from the United States consumer expenditure survey," Information Economics and Policy, Elsevier, vol. 8(3), pages 163-203, September.
  4. Eriksson, Ross C & Kaserman, David L & Mayo, John W, 1998. "Targeted and Untargeted Subsidy Schemes: Evidence from Postdivestiture Efforts to Promote Universal Telephone Service," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 477-502, October.
  5. Jerry Hausman, 2009. "Taxation by Telecommunications Regulation," Books, American Enterprise Institute, number 24216, 6.
  6. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
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