yes, spending more money on schools leads to better outcomes

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.

Author: Dan Hirschman

I am a sociologist interested in the use of numbers in organizations, markets, and policy. For more info, see here.

3 thoughts on “yes, spending more money on schools leads to better outcomes”

  1. This is interesting. My only worry in reading it is that I’m excited because of confirmation bias–it says what I want it to say. Do we need to worry that this complex and careful analysis is exploiting a relationship that would not hold up to sensitivity analysis? I have not worked through the analysis myself, no time. But does the hivemind or the Internets have opinions?

    Liked by 1 person

    1. An economist friend on FB commented that we should at least be skeptical of the formulation of the finding here (“that a 25% increase in per pupil spending throughout one’s school years could eliminate the average attainment gaps”). He was overall impressed with the empirics, but these sorts of methods are ill-suited to giving precise estimates of large-scale shifts – how would the overall quality of teachers change if there was suddenly that much more hiring in low-income districts? Would there be a lot of poaching which bid up teacher salaries but not actually a major shift of new high quality teachers entering the field? Etc. On the other hand, there might be positive externalities that make the 25% figure an overestimate – if big improvements of schooling lead to better neighborhood environments, peer effects, etc. It’s just hard to say, and fancy econometrics can only take you so far in forecasting the results of a massive policy.


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