Pennies from Heaven: Using Exogenous Tax Variation to Identify Effects of School Resources on Pupil Achievement

Abstract

Abstract:Despite important policy implications associated with the allocation of education resources, evidence on the effectiveness of school inputs remains inconclusive. In part, this is due to endogenous allocation; families sort themselves non-randomly into school districts and school districts allocate money based in order to compensate (or reinforce) differences in child abilities, which leaves estimates of school input effects likely to be biased. Using variation in education expenditures induced by the location of natural resources in Norway, we examine the effect of school resources on pupil outcomes. We find that higher school expenditures, triggered by higher revenues from local taxes on hydropower plants, have a significantly positive effect on pupil performance at age 16. The IV estimates contrast with the standard cross-sectional estimates that reveal no effects of extra resources.

Does Money Matter in the Long Run? Effects of School Spending on Educational Attainment

“…Some examine effects on long-term outcomes using crude measures of aggregate earnings and educational attainment (e.g., Card and Krueger 1992). A number of better identified papers isolate the short-run effect of spending by exploiting school finance reforms either in individual states (e.g., Downes 1992, Guryan 2001, nationally (e.g., Hoxby 2001, Card andPayne 2002), or by exploiting other sources of plausibly exogenous variation (e.g., Leuven et al 2007;Haegeland, Raaum, and Salvanes 2012). Most of these studies find positive effects of spending.…”

Education Research and Administrative Data

“…These topics range from the questions of how gender composition of classrooms influences female school choice in Austria (Schneeweis and Zweimuller, 2012), or how ethnic and immigrant concentration in schools affects cognitive development of children in Denamrk 18 and England (Dustmann, Machin and Schonberg, 2010), through mandatory school entry and exit ages in Germany (Muhlenweg and Puhani, 2010) and the Netherlands (Cabus and De Witte, 2011) to school resources in Norway (Haegeland, Raaum andSalvanes, 2012), Canada (Leach, Payne andChan, 2010) and New York City (Rubenstein et al, 2009). There is also a substantial variation in the kind of inputs that are investigated in different states within the Union.…”

Nordic Economic Policy Review

“…Prior studies provide strong indications that differential resource allocation across schools plays an important compensating role in the Norwegian educational system. Schools with high shares of disadvantaged pupils in terms of family background tend to have higher teacher-pupil ratios than other schools (Haegeland et al, 2004), and schools with many children of immigrant background have a higher incidence of teacher's aides for pupils with special needs (Haegeland et al, 2009). Further, Haegeland et al (2008 identify a positive influence of additional school resources on pupil performance at the age of 16, and show that the large-scale expansion of subsidized child care in Norway during the late 1970's and 1980's had strong positive effects on children's educational attainment.…”