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Understanding the 20th Century Growth in U.S. School Spending


  • Eric A. Hanushek
  • Steven G. Rivkin


The persistent increase in spending on elementary and secondary schools has gone virtually undocumented and has received insufficient attention. Real expenditure per student increased at 3« percent per year over the entire period of 1890-1990. A decomposition of the spending growth shows that it was propelled by a combination of falling pupil-teacher ratios, increasing real wages to teachers, and rising expenditures outside of the classroom. While the expansion of education for the handicapped has had a disproportionate effect on spending, most of the growth in expenditure during the 1980s came from other sources. Teacher salary increases, which reflect competitive pressures particularly for females, have nevertheless failed to keep up with wages in other occupationsþleading to likely declines in teacher quality over time. Moreover, the magnitude of the wage decline is larger than commonly thought because the relative aging of teachers has masked the sizable declines when teachers are compared to comparably aged people in other occupations.

Suggested Citation

  • Eric A. Hanushek & Steven G. Rivkin, 1996. "Understanding the 20th Century Growth in U.S. School Spending," NBER Working Papers 5547, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5547
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    References listed on IDEAS

    1. Hanushek, Eric A. & Pace, Richard R., 1995. "Who chooses to teach (and why)?," Economics of Education Review, Elsevier, vol. 14(2), pages 101-117, June.
    2. Hanushek, Eric A & Rivkin, Steven G & Taylor, Lori L, 1996. "Aggregation and the Estimated Effects of School Resources," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 611-627, November.
    3. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150-150, March.
    4. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
    5. Flyer, Fredrick & Rosen, Sherwin, 1997. "The New Economics of Teachers and Education," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 104-139, January.
    6. 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 1141-1177, September.
    7. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
    8. Dale Ballou & Michael Podgursky, 1995. "Recruiting Smarter Teachers," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 326-338.
    9. Dale Ballou, 1996. "Do Public Schools Hire the Best Applicants?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 97-133.
    10. Akerhielm, Karen, 1995. "Does class size matter?," Economics of Education Review, Elsevier, vol. 14(3), pages 229-241, September.
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    Cited by:

    1. Glewwe, Paul & Kremer, Michael & Moulin, Sylvie & Zitzewitz, Eric, 2004. "Retrospective vs. prospective analyses of school inputs: the case of flip charts in Kenya," Journal of Development Economics, Elsevier, vol. 74(1), pages 251-268, June.
    2. Eric A. Hanushek, 2004. "Some Simple Analytics of School Quality," NBER Working Papers 10229, National Bureau of Economic Research, Inc.
    3. Luiz Felipe Leite Estanislau do Amaral & Naércio Menezes-Filho, 2008. "A Relação entre Gastos Educacionais e Desempenho Escolar," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807201800160, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    4. Heshmati, Almas, 2002. "Quality adjusted measures of services in public schools," European Journal of Operational Research, Elsevier, vol. 136(3), pages 655-670, February.
    5. Kelly Bedard & William O. Brown, Jr., "undated". "The Allocation of Public School Expenditures," Claremont Colleges Working Papers 2000-16, Claremont Colleges.
    6. Eric A. Hanushek & John F. Kain & Steven G. Rivkin, 1998. "Does Special Education Raise Academic Achievement for Students with Disabilities?," NBER Working Papers 6690, National Bureau of Economic Research, Inc.
    7. Eric A. Hanushek, "undated". "The Evidence on Class Size," Wallis Working Papers WP10, University of Rochester - Wallis Institute of Political Economy.
    8. Francine D. Blau, 1996. "Symposium on Primary and Secondary Education," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 3-8, Fall.
    9. Eric A. Hanushek, 1996. "Measuring Investment in Education," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 9-30, Fall.
    10. Jonah Rockoff, 2003. "The Impact of Individual Teachers on Student Achievement: Evidence from Panel Data," Public Economics 0304002, EconWPA.
    11. Eric J. Brunner & Jon Sonstelie, 2006. "California's School Finance Reform: An Experiment in Fiscal Federalism," Working papers 2006-09, University of Connecticut, Department of Economics.

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    JEL classification:

    • I2 - Health, Education, and Welfare - - Education


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