Labor versus capital in the provision of public services: Estimating the marginal products of inputs in the production of student outcomes✰

Abstract

Does the enormous variation in financial resources available to local schools affect student achievement? There is an intense debate over the inequality of opportunity in public schools due to differences in financial resources, but there is little empirical evidence that sheds light on this issue. The main purpose of this paper is to measure the impact of various types of school expenditures (i.e. operating, minor capital, and major capital expenditures) on the short-and long-term educational achievement of students. This paper also looks at various channels (i.e. class size, attendance, discipline, and teachers' compensation) through which each type of expenditure could affect the performance of students. I use a dynamic regression discontinuity design that relies upon the exogenous variation in public school funding in Ohio that is created by marginally approved or failed local referenda to fund school districts. I find that only one type of expenditure, the approval of additional operating expenditures, has a positive effect in the short-term on the math proficiency of students subject to Ohio high school graduation tests, i.e. about 0.033 standard deviations (0.27 percentage points) for every additional $1,000 extra per pupil operating expenditure. I also find that the subsequent increase in the average expenditure on instructional staff is the only channel that can explain this effect. I do not find any long-term effect for any type of school expenditures.

What Works and for Whom? Effectiveness and Efficiency of School Capital Investments Across the U.S

“…For example, if there are diminishing marginal returns from spending time in safe and comfortable facilities throughout the day, socio-economically disadvantaged students may gain more from attending schools in better conditions (Rauscher, 2020;Enami et al, 2021).…”

“…Our study is also related to a set of studies, pioneered by Cellini et al (2010), that have estimated the effects of school capital expenditure on students and the real estate market, reaching conflicting conclusions. Most of these studies leverage evidence from single states (Cellini et al, 2010;Goncalves, 2015;Hong and Zimmer, 2016;Conlin and Thompson, 2017;Rauscher, 2020;Enami et al, 2021; or individual school districts (Neilson and Zimmerman, 2014;Lafortune and Sch önholzer, 2022). The only exception is Brunner et al (2022), who use variation in revenues from wind energy installations and test score data from the NAEP to study impacts across states.…”

What Works and for Whom? Effectiveness and Efficiency of School Capital Investments Across the U.S

“…For example, if there are diminishing marginal returns from spending time in safe and comfortable facilities throughout the day, socio-economically disadvantaged students may gain more from attending schools in better conditions (Rauscher, 2020;Enami et al, 2021).…”

“…Our study is also related to a set of studies, pioneered by Cellini et al (2010), that have estimated the effects of school capital expenditure on students and the real estate market, reaching conflicting conclusions. Most of these studies leverage evidence from single states (Cellini et al, 2010;Goncalves, 2015;Hong and Zimmer, 2016;Conlin and Thompson, 2017;Rauscher, 2020;Enami et al, 2021; or individual school districts (Neilson and Zimmerman, 2014;Lafortune and Sch önholzer, 2022). The only exception is Brunner et al (2022), who use variation in revenues from wind energy installations and test score data from the NAEP to study impacts across states.…”

What Works and for Whom? Effectiveness and Efficiency of School Capital Investments Across the U.S

“…For example, if there are diminishing marginal returns from spending time in safe and comfortable facilities throughout the day, socio-economically disadvantaged students may gain more from attending schools in better conditions (Rauscher, 2020;Enami et al, 2021).…”