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Does money matter for schools?

  • Holmlund, Helena
  • McNally, Sandra
  • Viarengo, Martina

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 England, school expenditure has increased by about 40% since 2000. Thus assessing whether such spending has had an impact on educational outcomes is of paramount importance. We address this issue using data of better quality than what are often available in similar studies and 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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Article provided by Elsevier in its journal Economics of Education Review.

Volume (Year): 29 (2010)
Issue (Month): 6 (December)
Pages: 1154-1164

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Handle: RePEc:eee:ecoedu:v:29:y:2010:i:6:p:1154-1164
Contact details of provider: Web page: http://www.elsevier.com/locate/econedurev

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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. 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.
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  5. Joydeep Roy, 2011. "Impact of School Finance Reform on Resource Equalization and Academic Performance: Evidence from Michigan," Education Finance and Policy, MIT Press, vol. 6(2), pages 137-167, April.
  6. Alan Krueger & Diane Whitmore, 1999. "The Effect of Attending a Small Class in the Early Grades on College-Test Taking and Middle School Test Results: Evidence from Project STAR," Working Papers 806, Princeton University, Department of Economics, Industrial Relations Section..
  7. Machin, Stephen & McNally, Sandra, 2004. "The Literacy Hour," IZA Discussion Papers 1005, Institute for the Study of Labor (IZA).
  8. 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.
  9. 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.
  10. Alan Krueger, 1997. "Experimental Estimates of Education Production Functions," Working Papers 758, Princeton University, Department of Economics, Industrial Relations Section..
  11. 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.
  12. 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.
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