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Recent public discussions and legal decisions suggest that school segregation will remain persistent in the United States, but increased transparency may help monitor spending across schools. These circumstances revive an old question: is it possible to achieve an educational system that is separate but equal—or better—in terms of spending? This question motivates further understanding the measurement of spending progressivity and its association with segregation. Focusing on economic disadvantage, we compare two commonly-used measures of spending progressivity: exposure-based and slope-based. We show that each measure is predicated on different assumptions about the progressivity of within-school resource allocations, and that they are theoretically linked through segregation. We empirically examine school spending progressivity and its properties using nationwide school spending data from the 2018-19 school year. Consistent with our theory, the exposure-based measure is the slope-based measure shrunk inversely by economic school segregation. This property makes more segregated school districts look more progressive on the exposure-based measure, representing a seemingly “separate but better” relationship. However, we show that this provocative pattern may be reversed by relatively modest poor-versus-nonpoor differences in unobserved parental contributions. We discuss implications for the measurement of progressivity, and for theory on public educational investments broadly.
Current public pension funding policy has arguably failed on both theoretical and empirical grounds. The traditional actuarial approach elides the risk-return tradeoff at the heart of finance economics and has resulted in steadily rising contribution rates, instead of a sustainable steady state. We propose an economic reformulation of funding policy based on steady-state analysis of the fundamental equations of motion for pension asset and liability growth, incorporating both an expected return on risky assets and a low-risk discount rate for liabilities. Our steady-state result simultaneously conveys the benefit of risky investment and the cost of the associated risk. We integrate our analysis into a simple social welfare function to re-examine the basis for pre-funding and elucidate the net benefits of using risky assets to defray contributions. We also formally derive a family of transition policies for convergence to the expected steady state. We illustrate how the parameters of our proposed policy can be adjusted to manage the tradeoff between long-run contribution rate risk and short-term responsiveness. We believe our analysis provides the basis for reformulating contribution policy in a way that better supports sustainability and coherently conveys the tradeoffs consistent with finance economics.
How far is the world away from ensuring that every child obtains the basic skills needed to be internationally competitive? And what would accomplishing this mean for world development? Based on the micro data of international and regional achievement tests, we map achievement onto a common (PISA) scale. We then estimate the share of children not achieving basic skills for 159 countries that cover 98.1% of world population and 99.4% of world GDP. We find that at least two-thirds of the world’s youth do not reach basic skill levels, ranging from 24% in North America to 89% in South Asia and 94% in Sub-Saharan Africa. Our economic analysis suggests that the present value of lost world economic output due to missing the goal of global universal basic skills amounts to over $700 trillion over the remaining century, or 11% of discounted GDP.
School districts in the United States often borrow on the municipal bond market to pay for capital projects. Districts serving economically disadvantaged communities tend to receive lower credit ratings and pay higher interest rates. To remedy this problem, 24 states have established credit enhancement programs that promise to repay district debt when a district cannot do so, thereby enhancing the district’s credit rating. I rely on cross- and within-district variations to estimate the effect of receiving state credit enhancement on district bond interest rate, per-pupil capital spending, and student performance. State enhancement reduces district bond interest rates by 6% and increases per-student capital spending by 6% to 7%. It also reduces the disparity in interest rate and capital spending across districts serving lower and higher income families, with no discernible effect on test scores. I find no evidence that the amount of enhanced school debt is associated with significant changes in interest rates paid by state governments. Districts in states without such programs could have achieved cost savings in the range of $383 million to $1 billion from 2009 to 2019 had the states adopted similar programs.
Measures of student disadvantage—or risk—are critical components of equity-focused education policies. However, the risk measures used in contemporary policies have significant limitations, and despite continued advances in data infrastructure and analytic capacity, there has been little innovation in these measures for decades. We develop a new measure of student risk for use in education policies, which we call Predicted Academic Performance (PAP). PAP is a flexible, data-rich indicator that identifies students at risk of poor academic outcomes. It blends concepts from emerging “early warning” systems with principles of incentive design to balance the competing priorities of accurate risk measurement and suitability for policy use. PAP is more effective than common alternatives at identifying students who are at risk of poor academic outcomes and can be used to target resources toward these students—and students who belong to several other associated risk categories—more efficiently.
This paper contributes to our understanding of American education politics by exploring when and why states redistribute K-12 education dollars to poorer schools. It does so by examining three explanations for intra-state changes in progressivity: court-ordered finance reforms, political trends, and demographic changes. Using state-level data from 1995-2016, we find mixed evidence that progressivity increased following a court-ordered school finance overhaul. Rather, we show that changes in progressivity were most consistently tied to changes in student demography: as students became poorer, or more racially diverse, lawmakers created less progressive finance systems. The paper concludes by discussing what these findings mean for advocates seeking to protect and advance gains in education spending progressivity.
Levels of governance (the nation, states, and districts), student subgroups (racially and ethnically minoritized and economically disadvantaged students), and types of resources (expenditures, class sizes, and teacher quality) intersect to represent a complex and comprehensive picture of K-12 educational resource inequality. Drawing on multiple sources of the most recently available data, we describe inequality in multiple dimensions. At the national level, racially and ethnically minoritized and economically disadvantaged students receive between $30 and $800 less in K-12 expenditures per pupil than White and economically advantaged students. At the state and district levels, per-pupil expenditures generally favor racially and ethnically minoritized and economically disadvantaged students compared to White and economically advantaged students. Looking at nonpecuniary resources, minoritized and economically disadvantaged students have smaller class sizes than their subgroup counterparts in the average district, but these students also have greater exposure to inexperienced teachers. We see no evidence that district-level spending in favor of traditionally disadvantaged subgroups is explained by district size, average district spending, teacher turnover, or expenditures on auxiliary staff, but Black and Hispanic spending advantage is correlated with the relative size of the Black and Hispanic special education population.
Performance-based funding models for higher education, which tie state support for institutions to performance on student outcomes, have proliferated in recent decades. Some states have designed these policies to also address educational attainment gaps by including bonus payments for traditionally low-performing groups. Using a Synthetic Control Method research design, we examine the impact of these funding regimes on race-based completion gaps in Tennessee and Ohio. We find no evidence that performance-based funding narrowed race-based completion gaps. In fact, contrary to their intended purpose, we find that performance-based funding widened existing gaps in certificate completion in Tennessee. Across both states, the estimated impacts on associate degree outcomes are also directionally consistent with performance-based funding exacerbating racial inequities in associate degree attainment.
Financing college expenses through an income share agreement (ISA) is an arrangement where the student agrees to pay a fixed percentage of future earned income for a designated period of time in exchange for college funding. Using administrative and survey data for all eligible applicants to a university ISA program, I estimate the adverse selection into the ISA and provide preliminary estimates of the moral hazard for ISA participants. Identification of adverse selection comes from being able to observe the full set of eligible students who apply to the program. There is evidence of selection on the offered income share rate (which is determined by the student’s major) as well as on parent characteristics, though not parent income. Surprisingly, there is no evidence of adverse selection on student ability as measured by SAT score and college grades. I find no differential selection on other student characteristics including demographics and measures of debt aversion, risk aversion, and time preference. Controlling for observable factors, ISA participation increases the likelihood of college graduation by 3 percentage points and decreases starting salary by $5,000 on average.
The Coronavirus Aid, Relief and Economic Security (CARES) Act passed by Congress in 2020 included significant aid to state education systems. These included direct aid to K-12 districts and higher education institutions, and funds to be used at the discretion of Governors through the Governor’s Emergency Education Relief Fund (GEER). We examine the factors influencing where and how GEER funding was distributed across state K-12 systems and what inequities were introduced in its spending. Using a mixed methods analysis of state GEER spending plans and district-level finance data, we focus specifically on how governors sought to target schools serving disadvantaged student groups. We find that several state leaders decided to send their GEER funds to school districts via funding formulas, and that some Governors made decisions to direct their GEER funds towards certain student groups. State spending patterns were not strongly related to governor political ideology or the states’ existing funding formulas or inter-district resource allocation patterns. We discuss the implications of this policy related to two state case examples, California and New York, and provide insight for future education stimulus funding proposals.