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How Local Economic Conditions Affect School Finances, Teacher Quality, and Student Achievement: Evidence from the Texas Shale Boom

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  • Joseph Marchand
  • Jeremy G. Weber

Abstract

Whether improved local economic conditions lead to better student outcomes is theoretically ambiguous and will depend on how schools use additional revenues and how students and teachers respond to rising private sector wages. The Texas boom in shale oil and gas drilling, with its large and localized effects on wages and the tax base, provides a unique opportunity to address this question that spans the areas of education, labor markets, and public finance. An empirical approach using variation in shale geology across school districts shows that the boom reduced test scores and student attendance, despite tripling the local tax base and creating a revenue windfall. Schools spent additional revenue on capital projects and debt service, but not on teachers. As the gap between teacher wages and private sector wages grew, so did teacher turnover and the percentage of inexperienced teachers, which helps explain the decline in student achievement. Changes in student composition did not account for the achievement decline but instead helped to moderate it. The findings illustrate the potential value of using revenue growth to retain teachers in times of rising private sector wages.

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  • Joseph Marchand & Jeremy G. Weber, 2020. "How Local Economic Conditions Affect School Finances, Teacher Quality, and Student Achievement: Evidence from the Texas Shale Boom," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(1), pages 36-63, January.
  • Handle: RePEc:wly:jpamgt:v:39:y:2020:i:1:p:36-63
    DOI: 10.1002/pam.22171
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    3. By Marianne Haraldsvik & Bjarne Strøm, 2022. "Adult skills and labor market conditions during teenage years: cross-country evidence from international surveys [Is post-secondary education a safe port and for whom? Evidence from Canadian data]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 894-919.
    4. Fraenkel, Rebecca Cannon, 2022. "Local labor markets and job match quality: Teachers," Labour Economics, Elsevier, vol. 78(C).
    5. Chan, Jeff & Karim, Ridwan, 2023. "Oil royalties and the provision of public education in Brazil," Economics of Education Review, Elsevier, vol. 92(C).
    6. Max Harleman & Pramod Manohar & Elaine L. Hill, 2022. "Negotiations of Oil and Gas Auxiliary Lease Clauses: Evidence from Pennsylvania’s Marcellus Shale," NBER Working Papers 30806, National Bureau of Economic Research, Inc.
    7. Amanda Chuan, 2022. "The impact of oil and gas job opportunities during youth on human capital," Southern Economic Journal, John Wiley & Sons, vol. 89(2), pages 406-439, October.
    8. 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).
    9. Max Harleman, 2023. "Compensating communities for industrial disamenities: The case of shale gas development," Economic Inquiry, Western Economic Association International, vol. 61(1), pages 10-34, January.
    10. Daniel Raimi & Emily Grubert & Jake Higdon & Gilbert Metcalf & Sophie Pesek & Devyani Singh, 2023. "The Fiscal Implications of the US Transition Away from Fossil Fuels," Review of Environmental Economics and Policy, University of Chicago Press, vol. 17(2), pages 295-315.
    11. Jarrín-V, Pablo & Falconí, Fander & Cango, Pedro & Ramos-Martin, Jesus, 2021. "Knowledge gaps in Latin America and the Caribbean and economic development," World Development, Elsevier, vol. 146(C).
    12. Sam Sims & Asma Benhenda, 2022. "The effect of financial incentives on the retention of shortage-subject teachers: evidence from England," CEPEO Working Paper Series 22-04, UCL Centre for Education Policy and Equalising Opportunities, revised Apr 2022.
    13. Ole Henning Nyhus, 2020. "When outside options bite: Labor demand in the Norwegian salmon farming industry and educational investments," Working Paper Series 18720, Department of Economics, Norwegian University of Science and Technology.
    14. Emma García & Eunice S. Han, 2022. "Teachers’ Base Salary and Districts’ Academic Performance: Evidence From National Data," SAGE Open, , vol. 12(1), pages 21582440221, March.
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    More about this item

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • 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
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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    1. Labor Economics (ECON 431-531)

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