There’s a new paper in the Quarterly Journal of Economics that addresses an old puzzle: why do increases in spending on K-12 schools seem to yield small payoffs in terms of educational outcomes? Jackson, Johnson, and Persico use new evidence and various causal inference techniques to show that the naive prediction holds: more spending on schools leads to better educational outcomes, especially for poor students. Here’s how the authors summarize their findings:
Although we find small effects for children from affluent families, for low-income children, a 10% increase in per pupil spending each year for all 12 years of public school is associated with 0.46 additional years of completed education, 9.6% higher earnings, and a 6.1 percentage point reduction in the annual incidence of adult poverty. The results imply that a 25% increase in per pupil spending throughout one’s school years could eliminate the average attainment gaps between children from low-income (average family income of $31,925 in 2000 dollars) and nonpoor families (average family income of $72,029 in 2000 dollars). (Jackson et al. 2016: 160)
These results are strengthened by related findings that increased spending from school reforms led to reductions in student-teacher ratios, higher salaries for teachers, and longer school years. In other words, more money led to higher quality inputs to the educational process, which in turn produces better outcomes, especially for kids who need the most from school itself.