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Does money matter for schools?

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

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.

Suggested Citation

  • Holmlund, Helena & McNally, Sandra & Viarengo, Martina, 2009. "Does money matter for schools?," LSE Research Online Documents on Economics 23309, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:23309
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    References listed on IDEAS

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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. Gibbons, Stephen & Silva, Olmo & Weinhardt, Felix, 2014. "Neighbourhood Turnover and Teenage Attainment," IZA Discussion Papers 8381, Institute for the Study of Labor (IZA).
    3. Mihály Fazekas, 2012. "School Funding Formulas: Review of Main Characteristics and Impacts," OECD Education Working Papers 74, OECD Publishing.
    4. Masci, Chiara & Ieva, Francesca & Agasisti, Tommaso & Paganoni, Anna Maria, 2016. "Does class matter more than school? Evidence from a multilevel statistical analysis on Italian junior secondary school students," Socio-Economic Planning Sciences, Elsevier, vol. 54(C), pages 47-57.
    5. Hægeland, Torbjørn & Raaum, Oddbjørn & Salvanes, Kjell G., 2012. "Pennies from heaven? Using exogenous tax variation to identify effects of school resources on pupil achievement," Economics of Education Review, Elsevier, vol. 31(5), pages 601-614.
    6. Figlio, D. & Karbownik, K. & Salvanes, K.G., 2016. "Education Research and Administrative Data," Handbook of the Economics of Education, Elsevier.
    7. Chowa, Gina A.N. & Masa, Rainier D. & Ramos, Yalitza & Ansong, David, 2015. "How do student and school characteristics influence youth academic achievement in Ghana? A hierarchical linear modeling of Ghana YouthSave baseline data," International Journal of Educational Development, Elsevier, vol. 45(C), pages 129-140.
    8. Eyles, Andrew & Machin, Stephen & McNally, Sandra, 2017. "Unexpected school reform: Academisation of primary schools in England," Journal of Public Economics, Elsevier, vol. 155(C), pages 108-121.
    9. repec:wly:econjl:v:127:y:2017:i:599:p:177-198 is not listed on IDEAS
    10. 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.
    11. Nicholas Crafts, 2013. "Returning to Growth: Policy Lessons from History," Fiscal Studies, Institute for Fiscal Studies, vol. 34(2), pages 255-282, June.
    12. Gibbons, Stephen & McNally, Sandra & Viarengo, Martina, 2011. "Does additional spending help urban schools? An evaluation using boundary discontinuities," LSE Research Online Documents on Economics 44676, London School of Economics and Political Science, LSE Library.
    13. 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.
    14. Richard Cebula & Franklin Mixon & Mark Montez, 2015. "Teachers’ salaries and human capital, and their effects on academic performance: an institution-level analysis of Los Angeles County high schools," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(2), pages 347-356, April.
    15. Monique De Haan, 2017. "The Effect of Additional Funds for Low‐ability Pupils: A Non‐parametric Bounds Analysis," Economic Journal, Royal Economic Society, vol. 127(599), pages 177-198, February.
    16. Kerris Cooper & Kitty Stewart, 2017. "Does Money Affect Children’s Outcomes? An update," CASE Papers /203, Centre for Analysis of Social Exclusion, LSE.
    17. Pal, Sarmistha & Saha, Bibhas, 2014. "In 'Trusts' We Trust: Socially Motivated Private Schools in Nepal," IZA Discussion Papers 8270, Institute for the Study of Labor (IZA).
    18. Machin, Stephen & Wyness, Gill & McNally, Sandra, 2013. "Education in a devolved Scotland: a quantitative analysis," LSE Research Online Documents on Economics 57971, London School of Economics and Political Science, LSE Library.
    19. Marcelo Araújo Castro, 2016. "Using A Quasi-Experiment To Identify The Effects Of Education Spending On School Quality," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 221, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    20. McNally, Sandra, 2010. "Evaluating education policies: the evidence from economic research," LSE Research Online Documents on Economics 57973, London School of Economics and Political Science, LSE Library.
    21. Lupton, Ruth & Hills, John & Stewart, Kitty & Vizard, Polly, 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.
    22. repec:eee:resene:v:49:y:2017:i:c:p:150-164 is not listed on IDEAS
    23. Silliman, Mikko, 2017. "Targeted Funding, Immigrant Background, and Educational Outcomes: Evidence from Helsinki's “Positive Discrimination†Policy," Working Papers 91, VATT Institute for Economic Research.
    24. 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).

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