The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms

83 Pages Posted: 20 Jan 2015 Last revised: 30 Aug 2019

See all articles by C. Kirabo Jackson

C. Kirabo Jackson

Northwestern University

Rucker Johnson

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy

Claudia Persico

American University

Date Written: January 2015

Abstract

Since Coleman (1966), many have questioned whether school spending affects student outcomes. The school finance reforms that began in the early 1970s and accelerated in the 1980s caused some of the most dramatic changes in the structure of K–12 education spending in US history. To study the effect of these school-finance-reform-induced changes in school spending on long-run adult outcomes, we link school spending and school finance reform data to detailed, nationally-representative data on children born between 1955 and 1985 and followed through 2011. We use the timing of the passage of court-mandated reforms, and their associated type of funding formula change, as an exogenous shifter of school spending and we compare the adult outcomes of cohorts that were differentially exposed to school finance reforms, depending on place and year of birth. Event-study and instrumental variable models reveal that a 10 percent increase in per-pupil spending each year for all twelve years of public school leads to 0.27 more completed years of education, 7.25 percent higher wages, and a 3.67 percentage-point reduction in the annual incidence of adult poverty; effects are much more pronounced for children from low-income families. Exogenous spending increases were associated with sizable improvements in measured school quality, including reductions in student-to-teacher ratios, increases in teacher salaries, and longer school years.

Suggested Citation

Kirabo Jackson, C. and Johnson, Rucker and Persico, Claudia, The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms (January 2015). NBER Working Paper No. w20847. Available at SSRN: https://ssrn.com/abstract=2551655

C. Kirabo Jackson (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Rucker Johnson

University of California, Berkeley - The Richard & Rhoda Goldman School of Public Policy ( email )

2607 Hearst Avenue
Berkeley, CA 94720-7320
United States

Claudia Persico

American University ( email )

School of Public Affairs
Kerwin Hall, 4400 Massachusetts Ave NW
Washington, DC 20016
United States

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