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.

Revenue Scarcity and Government Outsourcing: Empirical Evidence From Norwegian Local Governments

“…Many Norwegian municipalities receive a substantial share of their revenues from hydroelectric power plants and related facilities. Following Haegeland et al (2012), Andersen et al (2014) and Borge et al (2015), we argue that revenues from hydropower plants represent an important source of revenue variation that is largely outside the control of local governments -and can therefore serve as a credible basis for strengthening the inferences obtained in our analysis (more details below). This proposition rests on the observation that hydropower revenues consist of two main parts, neither of which is under the (direct or indirect) control of local governments.…”

“…In contrast, and following Haegeland et al (2012), Andersen et al (2014) and Borge et al (2015), our approach builds on the fact that many Norwegian municipalities derive significant revenue streams from the presence of hydropower plants within their boundaries. These revenues -which can amount to a substantial share of the local budget -are independent of local government decision-making since all hydropower stations were constructed in the period 1950-90 (i.e.…”

“…Hægeland et al () use the same exogenous variation in Norwegian local government revenues to identify effects of school resources on pupil achievement. Andersen et al () employ it to illustrate that voter turnout increases with the financial stakes of the election as predicted by rational voter models (Geys , ; Cancela and Geys ).…”

Classroom Grade Composition and Pupil Achievement

“…One may however be concerned by the possibility of families moving to different school catchment areas in reaction to or anticipating classroom grade composition during high school. Haegeland et al (2012), who use the same pupil data as we do, report that in Norway as a whole 95.3% of the pupils lived in their graduation municipality throughout all three years in junior high schools. We can implement a check by comparing the administrative head counts for 7th and 8th grade with the 9th grade head counts when these 7th and 8th graders are supposed to be in 9th grade (unless they move to another school).…”

The Effect of School Spending on Student Achievement: Addressing Biases in Value-Added Models

“…(), Lavy () and Haegeland et al . ()). The main econometric issues with estimating such models are input omission and mismeasurement of test scores, which may bias the estimation of the effect of school expenditure on pupil outcomes, of the persistence of achievement between education stages as well as the estimation of other input effects.…”