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Does Money Matter for Schools?

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Author Info

  • Holmlund, Helena

    ()
    (CEP, London School of Economics)

  • McNally, Sandra

    ()
    (London School of Economics)

  • Viarengo, Martina

    ()
    (Graduate Institute of International and Development Studies, Geneva)

Abstract

There is considerable disagreement in the academic literature about whether raising school expenditure improves educational outcomes. Yet changing the level of resources is one of the key policy levers open to governments. In the UK, school expenditure has increased by about 40 per cent in real terms since 2000. Thus, providing an answer to the question as to whether such spending has an impact on educational outcomes (and whether it is good use of public money) is of paramount importance. In this paper we address this issue for England using much better data than what has generally been used in such studies. We are also able to test our identification assumption by use of a falsification test. We find that the increase in school expenditure over recent years has had a consistently positive effect on outcomes at the end of primary school. Back-of-envelope calculations suggest that the investment may well be cost-effective. There is also some evidence of heterogeneity in the effect of expenditure, with higher effects for students who come from economically disadvantaged backgrounds.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3769.

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Length: 26 pages
Date of creation: Oct 2008
Date of revision:
Publication status: published in: Economics of Education Review, 2010, 29 (6), 1154-1164
Handle: RePEc:iza:izadps:dp3769

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Keywords: resources; education;

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References

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  1. Alan Krueger, 2000. "Economic Considerations and Class Size," Working Papers 826, Princeton University, Department of Economics, Industrial Relations Section..
  2. Alan Krueger, 1997. "Experimental Estimates of Education Production Functions," Working Papers 758, Princeton University, Department of Economics, Industrial Relations Section..
  3. Sengupta, Jati K. & Sfeir, Raymond E., 1986. "Production frontier estimates of scale in public schools in California," Economics of Education Review, Elsevier, vol. 5(3), pages 297-307, June.
  4. Machin, Stephen & McNally, Sandra, 2004. "The Literacy Hour," IZA Discussion Papers 1005, Institute for the Study of Labor (IZA).
  5. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule To Estimate The Effect Of Class Size On Scholastic Achievement," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 533-575, May.
  6. Joydeep Roy, 2004. "Impact of School Finance Reform on Resource Equalization and Academic Performance: Evidence from Michigan," Econometric Society 2004 North American Summer Meetings 425, Econometric Society.
  7. Stephen Gibbons & Stephen Machin & Olmo Silva, 2008. "Choice, Competition, and Pupil Achievement," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 912-947, 06.
  8. Hanushek, Eric A, 1986. "The Economics of Schooling: Production and Efficiency in Public Schools," Journal of Economic Literature, American Economic Association, vol. 24(3), pages 1141-77, September.
  9. Link, Charles R. & Mulligan, James G., 1991. "Classmates' effects on black student achievement in public school classrooms," Economics of Education Review, Elsevier, vol. 10(4), pages 297-310, December.
  10. Jonathan Guryan, 2001. "Does Money Matter? Regression-Discontinuity Estimates from Education Finance Reform in Massachusetts," NBER Working Papers 8269, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Ziesemer, Thomas, 2011. "What Changes Gini Coefficients of Education? On the dynamic interaction between education, its distribution and growth," MERIT Working Papers 053, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  2. Tommaso Agasisti & Sergio Longobardi, 2012. "Inequality in education: can Italian disadvantaged students close the gap? A focus on resilience in the Italian school system," Working Papers 2012/39, Institut d'Economia de Barcelona (IEB).
  3. Torbjørn Hægeland & Oddbjørn Raaum & Kjell G. Salvanes, 2007. "Pennies from heaven. Using exogenous tax variation to identify effects of school resources on pupil achievement," Discussion Papers 508, Research Department of Statistics Norway.
  4. De Witte, Kristof & Geys, Benny & Solondz, Catharina, 2014. "Public expenditures, educational outcomes and grade inflation: Theory and evidence from a policy intervention in the Netherlands," Economics of Education Review, Elsevier, vol. 40(C), pages 152-166.
  5. Mihály Fazekas, 2012. "School Funding Formulas: Review of Main Characteristics and Impacts," OECD Education Working Papers 74, OECD Publishing.
  6. Ruth Lupton & John Hills & Kitty Stewart & Polly Vizard, 2013. "Labour’s social policy record: policy, spending and outcomes 1997-2010," LSE Research Online Documents on Economics 51070, London School of Economics and Political Science, LSE Library.
  7. Gibbons, Steve & McNally, Sandra & Viarengo, Martina, 2012. "Does Additional Spending Help Urban Schools? An Evaluation Using Boundary Discontinuities," IZA Discussion Papers 6281, Institute for the Study of Labor (IZA).
  8. Monique De Haan, 2012. "The Effect of Additional Funds for Low-Ability Pupils - A Nonparametric Bounds Analysis," CESifo Working Paper Series 3993, CESifo Group Munich.
  9. Liang-Cheng Zhang & Tian-Ming Sheu, 2013. "Effective investment strategies on mathematics performance in rural areas," Quality & Quantity: International Journal of Methodology, Springer, vol. 47(5), pages 2999-3017, August.

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