Title

Using Market Valuation to Assess the Importance and Efficiency of Public School Spending

Author(s)

Lisa Barrow Lisa Barrow (Federal Reserve Bank of Chicago)

Cecilia E. Rouse Cecilia Rouse (Princeton University and NBER)

Abstract

In this paper we take 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 average, additional state aid is valued by potential residents and that school districts appear to spend efficiently or, if anything, under spend. We also find that school districts spend less efficiently in areas in which they face little or no competition from other public schools, in large districts, and in areas in which residents are poor or less educated. One interpretation of these results is that increased competition has the potential to increase school efficiency in some areas.

Creation Date

2000-04

Section URL ID

IRS

Paper Number

438

URL

https://dataspace.princeton.edu/bitstream/88435/dsp0102870v85m/1/438.pdf

File Function

Jel

O29, O3

Keyword(s)

education, spending, efficiency, competition, tiebout

Suppress

false

Series

1