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Does the United States Spend Enough on Public Schools?

Author

Listed:
  • Patrick J. Bayer

    (Duke)

  • Peter Q. Blair

    (Harvard)

  • Kenneth Whaley

    (South Florida)

Abstract

The United States ranks low among peer countries on the ratio of teacher spending to per capita GDP. Is this (in)efficient? Using a spatial equilibrium model we show that spending on schools is efficient if an increase in school spending funded through local taxes would leave house prices unchanged. By exploiting plausibly exogenous shocks to both school spending and taxes, paired with 25 years of national data on local house prices, we find that an exogenous tax-funded increase in school spending would significantly raise house prices. These findings provide causal evidence that teacher spending in the U.S. is inefficiently low.

Suggested Citation

  • Patrick J. Bayer & Peter Q. Blair & Kenneth Whaley, 2024. "Does the United States Spend Enough on Public Schools?," Working Papers 2024-01, University of South Florida, Department of Economics.
    • Handle: RePEc:usf:wpaper:2024-01
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    References listed on IDEAS

    as
    1. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 588-638, August.
    2. Brueckner, Jan K., 1982. "A test for allocative efficiency in the local public sector," Journal of Public Economics, Elsevier, vol. 19(3), pages 311-331, December.
    3. Brueckner, Jan K., 1979. "Property values, local public expenditure and economic efficiency," Journal of Public Economics, Elsevier, vol. 11(2), pages 223-245, March.
    4. Eric A. Hanushek & Marc Piopiunik & Simon Wiederhold, 2019. "The Value of Smarter Teachers: International Evidence on Teacher Cognitive Skills and Student Performance," Journal of Human Resources, University of Wisconsin Press, vol. 54(4), pages 857-899.
    5. Kurt Schmidheiny & Sebastian Siegloch, 2023. "On event studies and distributed‐lags in two‐way fixed effects models: Identification, equivalence, and generalization," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(5), pages 695-713, August.
    6. Janet Currie & Lucas Davis & Michael Greenstone & Reed Walker, 2015. "Environmental Health Risks and Housing Values: Evidence from 1,600 Toxic Plant Openings and Closings," American Economic Review, American Economic Association, vol. 105(2), pages 678-709, February.
    7. Caroline M. Hoxby, 2001. "All School Finance Equalizations are Not Created Equal," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1189-1231.
    8. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    9. Patrick Bayer & Peter Q. Blair & Kenneth Whaley, 2020. "The Impact of School Finance Reforms on Local Tax Revenues," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 416-418, May.
    10. Chakrabarti, Rajashri & Roy, Joydeep, 2015. "Housing markets and residential segregation: Impacts of the Michigan school finance reform on inter- and intra-district sorting," Journal of Public Economics, Elsevier, vol. 122(C), pages 110-132.
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    Cited by:

    1. Dirk Krueger & Alexander Ludwig & Irina Popova, 2024. "Shaping Inequality and Intergenerational Persistence of Poverty: Free College or Better Schools," NBER Working Papers 32467, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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