Evidence on the Impact of State Government on Primary and Secondary Education and the Equity-Efficiency Trade Off
Posted: 1 Aug 2000
State governments may affect the productivity of primary and secondary education in two ways. First, various regulations imposed on local school districts are expected to make schools less efficient. Second, state efforts to reduce inequality in education spending make it more difficult for voters to increase school quality, which should lead to less voter monitoring of schools and thus less efficient schools. Our empirical analysis of state SAT scores in 1987-92 provides evidence on both effects. The state's revenue share, capturing state meddling in local decisions, has the expected negative impact on school efficiency. But our novel result is that state-induced spending equalization also lowers average test scores, but has had little if any effect on reducing the disparity in student achievement. These results bring into question policy efforts designed to shift education responsibilities from local governments to the state and federal governments.
JEL Classification: I28
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