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Using Market Valuation to Assess Public School Spending

  • Lisa Barrow
  • Cecilia Elena Rouse

In this paper we use a 'market-based' approach to examine whether increased school expenditures are valued by potential residents and whether the current level of public school provision is inefficient. We do so by employing an instrumental variables strategy to estimate the effect of state education aid on residential property values. We find evidence that, on net, additional state aid is valued by potential residents and that school districts do not appear to overspend on education. We also find that school districts may overspend in areas in which residents are poor or less educated, in large districts, and in districts with higher shares of rental property. One interpretation of these results is that increased competition has the potential to reduce overspending on public schools in some areas.

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File URL: http://www.nber.org/papers/w9054.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9054.

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Date of creation: Jul 2002
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Publication status: published as Barrow, Lisa and Cecilia Elena Rouse. "Using Market Valuation To Assess Public School Spending," Journal of Public Economics, 2004, v88(9-10,Aug), 1747-1769.
Handle: RePEc:nbr:nberwo:9054
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