The Effect of School Finance Reforms on the Distribution of Spending, Academic Achievement, and Adult Outcomes
The school finance reforms (SFRs) that began in the early 1970s and accelerated in the 1980s caused some of the most dramatic changes in the structure of K-12 education spending in U.S. history. We analyze the effects of these reforms on the level and distribution of school district spending, as well as their effects on subsequent educational and economic outcomes. In Part One, using a newly compiled database of school finance reforms and a recently available long panel of annual school district data on per-pupil spending that spans 1967-2010, we present an event-study analysis of the effects of different types of school finance reforms on per-pupil spending in low- and high-income school districts. We find that SFRs have been instrumental in equalizing school spending between low- and high-income districts and many reforms do so by increasing spending for poor districts. While all reforms reduce spending inequality, there are important differences by reform type: adequacy-based court-ordered reforms increase overall school spending, while equity-based court-ordered reforms reduce the variance of spending with little effect on overall levels; reforms that entail high tax prices (the amount of taxes a district must raise to increase spending by one dollar) reduce long-run spending for all districts, and those that entail low tax prices lead to increased spending growth, particularly for low-income districts. In Part Two, we link the spending and reform data to detailed, nationally-representative data on children born between 1955 and 1985 and followed through 2011 (the Panel Study of Income Dynamics) to study the effect of the reform-induced changes in school spending on long-run adult outcomes. These birth cohorts straddle the period in which most of the major school finance reform litigation accelerated, and thus the cohorts were differentially exposed, depending on place and year of birth. We use the timing of the passage of court-mandated reforms as an exogenous shifter of school spending across cohorts within the same district. Event-study and instrumental variable models reveal that a 20 percent increase in per-pupil spending each year for all 12 years of public school for children from poor families leads to about 0.9 more completed years of education, 25 percent higher earnings, and a 20 percentage-point reduction in the annual incidence of adult poverty; we find no effects for children from non-poor families. The magnitudes of these effects are sufficiently large to eliminate between two-thirds and all of the gaps in these adult outcomes between those raised in poor families and those raised in non-poor families. We present several pieces of evidence to support a causal interpretation of the estimates.
|Date of creation:||May 2014|
|Note:||CH ED LS PE|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- C. Kirabo Jackson, 2012. "Non-Cognitive Ability, Test Scores, and Teacher Quality: Evidence from 9th Grade Teachers in North Carolina," NBER Working Papers 18624, National Bureau of Economic Research, Inc.
- Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993.
"Earnings Losses of Displaced Workers,"
American Economic Review,
American Economic Association, vol. 83(4), pages 685-709, September.
- Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles 92-11, W.E. Upjohn Institute for Employment Research.
- Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues 92-28, Federal Reserve Bank of Chicago.
- Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
- Baicker, Katherine & Gordon, Nora, 2006. "The effect of state education finance reform on total local resources," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1519-1535, September.
- Kunz, Jim & Page, Marianne E. & Solon, Gary, 2003. "Are point-in-time measures of neighborhood characteristics useful proxies for children's long-run neighborhood environment?," Economics Letters, Elsevier, vol. 79(2), pages 231-237, May.
- Rucker C. Johnson, 2011. "Long-run Impacts of School Desegregation & School Quality on Adult Attainments," NBER Working Papers 16664, National Bureau of Economic Research, Inc.
- T. A. Downes & D. N. Figlio, "undated".
"School Finance Reforms, Tax Limits, and Student Performance: Do Reforms Level Up or Dumb Down?,"
Institute for Research on Poverty Discussion Papers
1142-97, University of Wisconsin Institute for Research on Poverty.
- Thomas Downes & David Figlio, 1998. "School Finance Reforms, Tax Limits, and Student Performance: Do Reforms Level-Up or Dumb Down?," Discussion Papers Series, Department of Economics, Tufts University 9805, Department of Economics, Tufts University.
- Kenneth Y. Chay & Jonathan Guryan & Bhashkar Mazumder, 2009. "Birth Cohort and the Black-White Achievement Gap: The Roles of Access and Health Soon After Birth," NBER Working Papers 15078, National Bureau of Economic Research, Inc.
- C. Kirabo Jackson, 2009. "Student Demographics, Teacher Sorting, and Teacher Quality: Evidence from the End of School Desegregation," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 213-256, April.
- Caroline M. Hoxby, 2001. "All School Finance Equalizations are Not Created Equal," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1189-1231.
- Caroline M. Hoxby, 1998. "All School Finance Equalizations Are Not Created Equal," NBER Working Papers 6792, National Bureau of Economic Research, Inc.
- Krueger, Alan B & Whitmore, Diane M, 2001. "The Effect of Attending a Small Class in the Early Grades on College-Test Taking and Middle School Test Results: Evidence from Project STAR," Economic Journal, Royal Economic Society, vol. 111(468), pages 1-28, January.
- Alan B. 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..
- Alan Krueger & Diane Whitmore, 2000. "The Effect of Attending a Small Class in the Early Grades on College-Test Taking and Middle School Test Results: Evidence from Project STAR," NBER Working Papers 7656, National Bureau of Economic Research, Inc.
- Caroline Minter Hoxby, 1996. "Are Efficiency and Equity in School Finance Substitutes or Complements?," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 51-72, Fall.
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
- Card, David & Payne, A. Abigail, 2002. "School finance reform, the distribution of school spending, and the distribution of student test scores," Journal of Public Economics, Elsevier, vol. 83(1), pages 49-82, January.
- Epple, Dennis & Ferreyra, Maria Marta, 2008. "School finance reform: Assessing general equilibrium effects," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1326-1351, June.
- Dennis N. Epple & Maria Marta Ferreyra, 2007. "School Finance Reform: Assessing General Equilibrium Effects," NBER Working Papers 13524, National Bureau of Economic Research, Inc.
- Hilary Hoynes & Diane Whitmore Schanzenbach & Douglas Almond, 2016. "Long-Run Impacts of Childhood Access to the Safety Net," American Economic Review, American Economic Association, vol. 106(4), pages 903-934, April.
- Hilary W. Hoynes & Diane Whitmore Schanzenbach & Douglas Almond, 2012. "Long Run Impacts of Childhood Access to the Safety Net," NBER Working Papers 18535, National Bureau of Economic Research, Inc.
- Rodney J. Andrews & Jing Li & Michael F. Lovenheim, 2012. "Quantile Treatment Effects of College Quality on Earnings: Evidence from Administrative Data in Texas," NBER Working Papers 18068, National Bureau of Economic Research, Inc.
- Betts, Julian R, 1995. "Does School Quality Matter? Evidence from the National Longitudinal Survey of Youth," The Review of Economics and Statistics, MIT Press, vol. 77(2), pages 231-250, May.
- Carrell Scott E & Carrell Susan A, 2006. "Do Lower Student to Counselor Ratios Reduce School Disciplinary Problems?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-26, April.
- Grogger, Jeff, 1996. "Does School Quality Explain the Recent Black/White Wage Trend?," Journal of Labor Economics, University of Chicago Press, vol. 14(2), pages 231-253, April.
- Murray, Sheila E & Evans, William N & Schwab, Robert M, 1998. "Education-Finance Reform and the Distribution of Education Resources," American Economic Review, American Economic Association, vol. 88(4), pages 789-812, September.
- Brunner, Eric & Sonstelie, Jon, 2003. "School finance reform and voluntary fiscal federalism," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2157-2185, September.
- Downes, Thomas A. & Schoeman, David, 1998. "School Finance Reform and Private School Enrollment: Evidence from California," Journal of Urban Economics, Elsevier, vol. 43(3), pages 418-443, May. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:20118. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.