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The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms

Author

Listed:
  • C. Kirabo Jackson
  • Rucker C. Johnson
  • Claudia Persico

Abstract

Since Coleman (1966), many have questioned whether school spending affects student outcomes. The school finance reforms 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 US history. To study the effect of these school-finance-reform-induced changes in school spending on long-run adult outcomes, we link school spending and school finance reform data to detailed, nationally-representative data on children born between 1955 and 1985 and followed through 2011. We use the timing of the passage of court-mandated reforms, and their associated type of funding formula change, as an exogenous shifter of school spending and we compare the adult outcomes of cohorts that were differentially exposed to school finance reforms, depending on place and year of birth. Event-study and instrumental variable models reveal that a 10 percent increase in per-pupil spending each year for all twelve years of public school leads to 0.27 more completed years of education, 7.25 percent higher wages, and a 3.67 percentage-point reduction in the annual incidence of adult poverty; effects are much more pronounced for children from low-income families. Exogenous spending increases were associated with sizable improvements in measured school quality, including reductions in student-to-teacher ratios, increases in teacher salaries, and longer school years.

Suggested Citation

  • C. Kirabo Jackson & Rucker C. Johnson & Claudia Persico, 2015. "The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms," NBER Working Papers 20847, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20847
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    References listed on IDEAS

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    Cited by:

    1. Reilee L. Berger & John V. Winters, 2016. "Does Private Schooling Increase Adult Earnings? Cohort-Level Evidence for U.S. States," The Review of Regional Studies, Southern Regional Science Association, vol. 46(3), pages 281-294, Winter.
    2. Paco Martorell & Kevin M. Stange & Isaac McFarlin, 2015. "Investing in Schools: Capital Spending, Facility Conditions, and Student Achievement," NBER Working Papers 21515, National Bureau of Economic Research, Inc.
    3. Emerson, Patrick M. & Knabb, Shawn D., 2018. "Demographic Uncertainty and Generational Consumption Risk with Endogenous Human Capital," IZA Discussion Papers 11358, Institute for the Study of Labor (IZA).
    4. Cabrera, José María & Webbink, Dinand, 2018. "Do higher salaries yield better teachers and better student outcomes?," MPRA Paper 86972, University Library of Munich, Germany.
    5. Singleton, John, 2017. "Incentives and the Supply of Effective Charter Schools," MPRA Paper 83532, University Library of Munich, Germany.
    6. Marisa Hidalgo-Hidalgo & Iñigo Iturbe-Ormaetxe, 2018. "Long-run effects of public expenditure on poverty," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 16(1), pages 1-22, March.
    7. Bond, Timothy N. & Mumford, Kevin J., 2018. "Teacher Performance Pay in the United States: Incidence and Adult Outcomes," IZA Discussion Papers 11432, Institute for the Study of Labor (IZA).
    8. Tomoaki Kotera & Ananth Seshadri, 2017. "Educational Policy and Intergenerational Policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 25, pages 187-207, April.
    9. C. Kirabo Jackson & Alexey Makarin, 2016. "Can Online Off-The-Shelf Lessons Improve Student Outcomes? Evidence from A Field Experiment," NBER Working Papers 22398, National Bureau of Economic Research, Inc.
    10. Richard J. Murnane & Sean F. Reardon, 2017. "Long-Term Trends in Private School Enrollments by Family Income," NBER Working Papers 23571, National Bureau of Economic Research, Inc.
    11. Sonja Settele & Reyn van Ewijk, 2017. "The effect of cigarette taxes during pregnancy on educational outcomes of the next generation," IAAEU Discussion Papers 201703, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    12. Matthew Davis & Fernando V. Ferreira, 2017. "Housing Disease and Public School Finances," NBER Working Papers 24140, National Bureau of Economic Research, Inc.
    13. Sungoh Kwon, 2017. "Does Public School Spending Raise Intergenerational Mobility?: Evidence from U.S. School Finance Reforms," Working papers 2017-06, University of Connecticut, Department of Economics.
    14. repec:bla:econpa:v:36:y:2017:i:3:p:335-350 is not listed on IDEAS
    15. repec:eee:jeborg:v:143:y:2017:i:c:p:58-77 is not listed on IDEAS
    16. repec:eee:ecoedu:v:59:y:2017:i:c:p:13-28 is not listed on IDEAS
    17. Martorell, Paco & Stange, Kevin & McFarlin, Isaac, 2016. "Investing in schools: capital spending, facility conditions, and student achievement," Journal of Public Economics, Elsevier, vol. 140(C), pages 13-29.
    18. Richard J. Murnane & Marcus R. Waldman & John B. Willett & Maria Soledad Bos & Emiliana Vegas, 2017. "The Consequences of Educational Voucher Reform in Chile," IDB Publications (Working Papers) 8491, Inter-American Development Bank.
    19. Diether Beuermann & C. Kirabo Jackson & Ricardo Sierra, 2015. "Privately Managed Public Secondary Schools and Academic Achievement in Trinidad and Tobago: Evidence from Rule-Based Student Assignments," IDB Publications (Working Papers) 7308, Inter-American Development Bank.
    20. Diether Beuermann & C. Kirabo Jackson & Ricardo Sierra, 2015. "Privately Managed Public Secondary Schools and Academic Achievement in Trinidad and Tobago: Evidence from Rule-Based Student Assignments," IDB Publications (Working Papers) 91836, Inter-American Development Bank.
    21. Alessandro Belmonte & Vincenzo Bove & Giovanna D’Inverno & Marco Modica, 2017. "School Infrastructure Spending and Educational Outcomes in Northern Italy," SPRU Working Paper Series 2017-20, SPRU - Science and Technology Policy Research, University of Sussex.
    22. Clemens, Jeffrey & Strain, Michael R., 2018. "Minimum Wage Analysis Using a Pre-Committed Research Design: Evidence through 2016," IZA Discussion Papers 11427, Institute for the Study of Labor (IZA).
    23. repec:eee:resene:v:49:y:2017:i:c:p:150-164 is not listed on IDEAS
    24. 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.
    25. Ali Enami, 2017. "Labor versus Capital in the Provision of Public Services: Estimating the Marginal Products of Inputs in the Production of Student Outcomes," Working Papers 1718, Tulane University, Department of Economics, revised Oct 2017.

    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • I20 - Health, Education, and Welfare - - Education - - - General
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J00 - Labor and Demographic Economics - - General - - - General
    • J1 - Labor and Demographic Economics - - Demographic Economics

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