Evaluating the Returns to Funding Different Measures of Student Disadvantage: Evidence From New Zealand

Much of the education finance literature is concerned with evaluating policies that seek to lessen the effect of economic disparities outside schools on the disparity of student outcomes within them. Examples include school finance reform to reduce schools’ reliance on local wealth, special education funding for students with physical or learning disabilities, and affirmative action admissions and support. A national funding programme used in New Zealand for all elementary and high schools provides a rare opportunity to evaluate the effectiveness of targeting alternative measures of socio-economic disadvantage. New Zealand targets five deprivation factors of the immediate neighbourhoods in which a school’s students live: low household income, lack of educational qualifications, employment in low skill occupations, household crowding, and the proportion receiving welfare. We use school fixed effects regressions to evaluate whether some disadvantage factors are more effective in raising achievement than others, and secondarily whether other measurable factors such as family structure, health or ethnicity retain strong negative covariance with achievement rates. We find that the marginal effectiveness of targeting “low skill occupation” is comparatively high, and of targeting “receiving welfare” is comparatively low, such that New Zealand would raise achievement rates if it raised the weight on the former and lowered it on the latter. In addition to the five disadvantage factors used, we find that single parent status, rural/urban status, and home ownership co-vary significantly with achievement rates.