Effects of school spending on educational, economic outcomes

Title: “The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms”

Authors: C. Kirabo Jackson, Rucker C. Johnson, Claudia Persico

What they found: Increases in per-pupil school spending lead to higher graduation rates and, when the students become adults, greater earnings and fewer cases of poverty. The benefits were particular large for low-income students.

Why it matters: On the surface, there seems to be no positive relationship between more school spending and better student achievement. But such surface-level summaries do not account for the complexities of how school funding is allotted. For instance, school districts with lots of low-income students are mandated by law to receive more funding. Tracking students born between 1955 and 1985, the researchers isolated the districts where court-mandated reforms would affect spending at those students’ schools; next, they compared those students’ achievement to similar students’ progress in districts that did not receive greater funding. The effects they found were huge and likely causal: A 10 percent increase in per-pupil spending led to higher graduation rates, nearly 10 percent higher earnings in adulthood, and fewer incidents of poverty later in life. The researchers found small effects on students from affluent families but huge effects on poor students.

Key quote: “Accordingly, our findings provide compelling evidence that money does matter and that better school resources can meaningfully improve the long-run outcomes of recently educated children. At the same time, our results also suggest that money alone might not improve outcomes because the effect of any spending increases will depend on exactly how funds are spent.”

Data they used: Longitudinal data on more than 15,000 children born between 1955 and 1985 and followed into adulthood, from the Panel Study of Income Dynamics.