School Bond Referendum, Capital Expenditure, and Student Achievement

Abstract

In the United States, the reform of the financial system of capital expenditure is under consideration, as people believe the current system through local referenda contributes to inequality in student achievement across school districts. Several studies using a regression discontinuity design (RDD) find zero to modest positive effects of capital expenditures on student achievement; however, these studies identify only the effect of capital expenditure financing by a marginally passed bond with a vote share at the cutoff. In this paper I estimate the average effect of capital expenditure on student achievement by incorporating a latent factor model into the existing RDD framework, and comparing school districts that are similar in their underlying confounding variables, namely preferences for educational investment. The results show that, on average, capital expenditure financed by a passed bond does not have significantly effect on student achievement.

Keywords: capital expenditure, student achievement, latent factor, bond referendum

JEL Classification: I22, H54