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

44 Pages Posted: 6 Feb 2010

See all articles by Torbjorn Haegeland

Torbjorn Haegeland

Statistics Norway; University of Oslo - Ragnar Frisch Centre for Economic Research

Oddbjorn Raaum

University of Oslo - Ragnar Frisch Centre for Economic Research

Kjell G. Salvanes

Norwegian School of Economics (NHH) - Department of Economics; IZA Institute of Labor Economics

Date Written: July 2007

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.

Keywords: Pupil achievement, school resources

JEL Classification: I21, I28, J24

Suggested Citation

Haegeland, Torbjorn and Raaum, Oddbjørn and Salvanes, Kjell G., Pennies from Heaven: Using Exogenous Tax Variation to Identify Effects of School Resources on Pupil Achievement (July 2007). NHH Dept. of Economics Discussion Paper No. 16/2007. Available at SSRN: https://ssrn.com/abstract=1548419 or http://dx.doi.org/10.2139/ssrn.1548419

Torbjorn Haegeland

Statistics Norway ( email )

N-0033 Oslo
Norway

University of Oslo - Ragnar Frisch Centre for Economic Research

Gaustadalleen 21
N-0317 Oslo
Norway

Oddbjørn Raaum

University of Oslo - Ragnar Frisch Centre for Economic Research ( email )

Gaustadalleen 21
N-0317 Oslo
Norway

Kjell G. Salvanes (Contact Author)

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway
+47 5 595 9315 (Phone)
+47 5 595 9543 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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