Do School Spending Cuts Matter? Evidence from the Great Recession

63 Pages Posted: 17 Jan 2018

See all articles by C. Kirabo Jackson

C. Kirabo Jackson

Northwestern University

Cora Wigger

Northwestern University

Heyu Xiong

Northwestern University

Date Written: January 2018

Abstract

During The Great Recession, national public-school per-pupil spending fell by roughly seven percent, and took several years to recover. The impact of such large and sustained education funding cuts is not well understood. To examine this, first, we document that the recessionary drop in spending coincided with the end of decades-long national growth in both test scores and college-going. Next, we show that this stalled educational progress was particularly pronounced in states that experienced larger recessionary budget cuts for plausibly exogenous reasons. To isolate budget cuts that were unrelated to (a) other ill-effects of the recession or (b) endogenous state policies, we use states’ historical reliance on State taxes (which are more sensitive to the business cycle) to fund public schools interacted with the timing of the recession as instruments for reductions in school spending. Cohorts exposed to these spending cuts had lower test scores and lower college-going rates. The test score impacts were larger for children in poor neighborhoods. Evidence suggests that both test scores and college-going were more adversely affected for Black and White students than Latinx students.

Suggested Citation

Kirabo Jackson, C. and Wigger, Cora and Xiong, Heyu, Do School Spending Cuts Matter? Evidence from the Great Recession (January 2018). NBER Working Paper No. w24203. Available at SSRN: https://ssrn.com/abstract=3102021

C. Kirabo Jackson (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Cora Wigger

Northwestern University

2001 Sheridan Road
Evanston, IL 60208
United States

Heyu Xiong

Northwestern University

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