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Economies of scale in public education: an econometric analysis

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  • K. Chakraborty
  • B. Biswas
  • WC. Lewis

Abstract

This article investigates the sources of scale economies in the production of public education. The relationship between the average cost of producing educational output and school characteristics including school and district size is estimated using a neoclassical cost function. The empirical analysis used panel data from Utah school districts and estimates the function using the covariance and error component models after making necessary corrections for heteroskedasticity and autocorrelation. The uncorrected fixed effects model generates a significant negative coefficient on district size in both the cost and expenditure functions; the coefficient on number of students has the hypothesized sign but is not significant in either equation. After making various corrections for autocorrelation and heteroskedasticity, the coefficients have the correct signs and are significant in all equations. Thus, it is concluded that scale economies arise from both sources but that the evidence is stronger for district size. Copyright 2000 Western Economic Association International.

Suggested Citation

  • K. Chakraborty & B. Biswas & WC. Lewis, 2000. "Economies of scale in public education: an econometric analysis," Contemporary Economic Policy, Western Economic Association International, vol. 18(2), pages 238-247, April.
  • Handle: RePEc:bla:coecpo:v:18:y:2000:i:2:p:238-247
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    References listed on IDEAS

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    1. Downes, Thomas A. & Pogue, Thomas F., 1994. "Adjusting School Aid Formulas for the Higher Cost of Educating Disadvantaged Students," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(1), pages 89-110, March.
    2. Gertler, Paul J & Waldman, Donald M, 1992. "Quality-Adjusted Cost Functions and Policy Evaluation in the Nursing Home Industry," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1232-1256, December.
    3. Downes, Thomas A. & Pogue, Thomas F., 1994. "Adjusting School Aid Formulas for the Higher Cost of Educating Disadvantaged Students," National Tax Journal, National Tax Association, vol. 47(1), pages 89-110, March.
    4. Jay G. Chambers, 1978. "Educational Cost Differentials and the Allocation of State Aid for Elementary/Secondary Education," Journal of Human Resources, University of Wisconsin Press, vol. 13(4), pages 459-481.
    5. Ratcliffe, Kerri & Riddle, Bruce & Yinger, John, 1990. "The fiscal condition of school districts in Nebraska: Is small beautiful?," Economics of Education Review, Elsevier, vol. 9(1), pages 81-99, March.
    6. Richard J. Butler & David H. Monk, 1985. "The Cost of Public Schooling in New York State: The Role of Scale and Efficiency in 1978-79," Journal of Human Resources, University of Wisconsin Press, vol. 20(3), pages 361-382.
    7. Elchanan Cohn, 1968. "Economies of Scale in Iowa High School Operations," Journal of Human Resources, University of Wisconsin Press, vol. 3(4), pages 422-434.
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    Cited by:

    1. Colegrave, Andrew D. & Giles, Margaret J., 2008. "School cost functions: A meta-regression analysis," Economics of Education Review, Elsevier, vol. 27(6), pages 688-696, December.
    2. Driscoll, Donna & Halcoussis, Dennis & Svorny, Shirley, 2003. "School district size and student performance," Economics of Education Review, Elsevier, vol. 22(2), pages 193-201, April.
    3. Tao, Hung-Lin & Yuan, Ming-Ching, 2005. "Optimal scale of a public elementary school with commuting costs--a case study of Taipei county," Economics of Education Review, Elsevier, vol. 24(4), pages 407-416, August.
    4. Rhys Andrews, 2013. "Local government size and efficiency in labor-intensive public services: evidence from local educational authorities in England," Chapters,in: The Challenge of Local Government Size, chapter 7, pages 171-188 Edward Elgar Publishing.
    5. Brunner, Eric J. & Squires, Tim, 2013. "The bargaining power of teachers’ unions and the allocation of school resources," Journal of Urban Economics, Elsevier, vol. 76(C), pages 15-27.
    6. Haelermans, Carla & Ruggiero, John, 2013. "Estimating technical and allocative efficiency in the public sector: A nonparametric analysis of Dutch schools," European Journal of Operational Research, Elsevier, vol. 227(1), pages 174-181.
    7. Haelermans, Carla & De Witte, Kristof, 2012. "The role of innovations in secondary school performance – Evidence from a conditional efficiency model," European Journal of Operational Research, Elsevier, vol. 223(2), pages 541-549.
    8. Heinesen, Eskil, 2005. "School district size and student educational attainment: evidence from Denmark," Economics of Education Review, Elsevier, vol. 24(6), pages 677-689, December.
    9. Leung, Ambrose & Ferris, J. Stephen, 2008. "School size and youth violence," Journal of Economic Behavior & Organization, Elsevier, vol. 65(2), pages 318-333, February.
    10. Brennan, Shae & Haelermans, Carla & Ruggiero, John, 2014. "Nonparametric estimation of education productivity incorporating nondiscretionary inputs with an application to Dutch schools," European Journal of Operational Research, Elsevier, vol. 234(3), pages 809-818.
    11. Mehari Mekonnen Akalu, 2002. "Measuring and Ranking Value Drivers," Tinbergen Institute Discussion Papers 02-043/2, Tinbergen Institute.
    12. Rhys Andrews, 2012. "Local Government Size and Efficiency in Labour Intensive Public Services: Evidence from Local Educational Authorities in England," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1214, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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