The effects of educational finance on school quality

• Main Author: Ardon, Kenneth
• Format: Dissertation
• Language: English
• Published: ProQuest Dissertations & Theses 01-01-1999
• Subjects: Education finance; Finance; School finance
• ISBN: 0599600721; 9780599600720

Researchers have focused a great deal of attention on the relationship between inputs and outputs in the production of education. For the most part, they have found that expenditures have little or no effect on student outcomes. However, these studies may suffer from misspecification and omitted variable bias. If expenditures are correlated with an unobserved determinant of school quality, past estimates of the effectiveness of resources will be biased and inconsistent. In other words, districts may spend more money in part because they serve students with low achievement levels. This could lead researchers to underestimate the effectiveness of increased spending. To test this concept, I begin by estimating a conventional educational production function. I then instrument for expenditures to investigate whether the possible endogeneity of expenditures influences the results. I find some evidence that OLS estimates of the coefficient on expenditures may be biased downwards—conclusions about the ineffectiveness of expenditures based upon past research may be incorrect. Chapter two extends the analysis using additional data from data sets commonly used by economists (HSB and NELS). I explore the possibility of omitted variable bias and instrument for inputs to correct for possible misspecification. The results with this data are not conclusive—the effect of any misspecification is unclear. Chapter three examines the recent poor performance of California students in national comparisons. In the early 1980's California's students performed better than their peers around the country on standardized tests. Some have blamed the decline on ineffective schools and the transformation in school finance since the 1970's. However, California's schools have faced an influx of non-English speaking immigrants during the same period. I test whether the decline in test scores was caused by changes in student characteristics and find that approximately half of the discrepancy between California and the rest of the country is due to different demographics.