Using Market Valuation to Assess Public School Spending

53 Pages Posted: 11 Jul 2002 Last revised: 28 Oct 2010

See all articles by Lisa Barrow

Lisa Barrow

Federal Reserve Bank of Chicago

Cecilia E. Rouse

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER)

Date Written: July 2002

Abstract

In this paper we use a 'market-based' approach to examine whether increased school expenditures are valued by potential residents and whether the current level of public school provision is inefficient. We do so by employing an instrumental variables strategy to estimate the effect of state education aid on residential property values. We find evidence that, on net, additional state aid is valued by potential residents and that school districts do not appear to overspend on education. We also find that school districts may overspend in areas in which residents are poor or less educated, in large districts, and in districts with higher shares of rental property. One interpretation of these results is that increased competition has the potential to reduce overspending on public schools in some areas.

Suggested Citation

Barrow, Lisa and Rouse, Cecilia E., Using Market Valuation to Assess Public School Spending (July 2002). NBER Working Paper No. w9054. Available at SSRN: https://ssrn.com/abstract=318849

Lisa Barrow

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312-322-5073 (Phone)
312-322-2357 (Fax)

Cecilia E. Rouse (Contact Author)

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States
609-258-4042 (Phone)
609-258-2907 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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