Addressing Open Questions in the School Spending Literature: Existing Evidence, Capital Expenditures, and Positive Externalities
Paper Session
Saturday, Jan. 8, 2022 10:00 AM - 12:00 PM (EST)
- Chair: Joshua Hyman, Amherst College
More School Funding, Less Crime?
Abstract
Crime is a negative externality with enormous social costs. The United States has the highest incarceration rate of any OECD country. Consequently, total expenditures on corrections currently exceed $82 billion annually, with direct expenditures on the wider justice system totaling over $250 billion. Concerns over these figures have attracted a large literature aiming to identify effective crime prevention strategies. In this paper, we ask whether it is possible to reduce crime rates by increasing public school funding, and, if so, whether this strategy is cost effective with respect to other crime prevention measures. Despite its enormous policy implications, surprisingly little is known about the relationship between public school funding and criminal activity. Economists interested in the benefits of school funding have traditionally focused on the private return to education (e.g., one's own test scores, educational attainment, and wages). However, if additional school funding also reduces crime, then the social return to school funding may exceed the private return. Thus, beyond its relevance for crime prevention, estimating the effect of additional school funding on criminal activity may also shed some light on the broader social returns of school funding---and consequently on its optimal level. Our empirical strategy examines whether public school children exposed to more funding during early grades are less likely to engage in criminal activity later in life. Specifically, we exploit plausibly exogenous variation in operational school funding driven by Michigan's 1994 school finance reform, Proposal A, as well as a novel source of administrative records which link statewide data on the universe of individual public school records, child welfare records, juvenile incarceration records, and adult arrests. To compare the effectiveness of distinct types of school funding for crime prevention, we additionally estimate the effect of capital expenditures on criminal activity by leveraging close capital bond referenda.The Impact of School Spending on Civic Engagement: Evidence from School Finance Reforms
Abstract
One of the primary rationales for the public provision of K-12 education and the large role played by state governments in financing K-12 education is that education fosters not only the development of human capital but also enhances social capital and civic engagement. However, despite the importance of such positive externalities in justifying the large K-12 educational investments made by state and local governments, very little evidence exists on whether and how K-12 school spending affects civic engagement. We provide some of the first causal evidence on how exogenous increases in K-12 school spending impact civic engagement. The court-ordered and legislative school finance reforms that occurred throughout the United States over the last several decades led to large and plausibly exogenous shocks to K-12 school spending. We leverage the timing and location of these school finance reforms to estimate event study and difference-in-differences models designed to isolate the causal impact of K-12 school spending on civic engagement. Our analysis is based on school district-level data from 1986 – present on K-12 school spending from the National Center for Education Statistics along with data on measures of civic engagement (e.g. voting behavior, volunteering, etc.) from multiple waves of the National Education Longitudinal Study of 1988 (NELS), the Education Longitudinal Study of 2002 (ELS) and the High School Longitudinal Study of 2009 (HSLS).School Capital Expenditure Rules, Student Outcomes, and Real Estate Capitalization
Abstract
School capital expenditures comprise a major component of public spending in the US, but there is substantial disagreement among economists and policymakers over the efficacy and efficiency of these investments. This paper exploits within-district variation in capital spending due to local bond elections to estimate the effects of school capital expenditures on student outcomes and the real estate market. While most of the existing evidence relies on case studies from individual districts or states, we provide the first nation-wide study of these effects, using data from more than 10,000 school districts across forty states. To this end, we assembled a new database containing a) the mechanisms governing capital funding in each state, b) school district bond election results, and c) student scores on state tests for a 15+ year national panel of school districts, compiled from several public data sources and standardized across states and years. We rely on a regression discontinuity approach across close bond elections to identify the causal effect of capital expenditures on student outcomes and real estate capitalization. We then exploit cross-state differences in fiscal rules such as tax limits and supermajority requirements for school bonds, allowing us to characterize both the mean effects across states and the distribution of effects across fiscal regimes, which speaks to whether fiscal constraints are too restrictive or too loose. Finally, we document the correlation of student achievement effects and house price effects across settings to estimate the share of valuation due to student achievement as opposed to local amenities.Discussant(s)
Diane Whitmore Schanzenbach
,
Northwestern University
Elizabeth U. Cascio
,
Dartmouth College
Kevin Stange
,
University of Michigan
C. Kirabo Jackson
,
Northwestern University
JEL Classifications
- H7 - State and Local Government; Intergovernmental Relations
- I2 - Education and Research Institutions