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Using market valuation to assess the importance and efficiency of public school spending

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  • Lisa Barrow
  • Cecilia Elena Rouse

Abstract

In this paper we take a \"market-based\" approach to examine whether increased school expenditures are valued by potential residents and whether the current level of public school provision is inefficient. We do so by employing an instrumental variables strategy to estimate the effect of state education aid on residential property values. We find evidence that, on average, additional state aid is valued by potential residents and that school districts appear to spend efficiently or, if anything, underspend. We also find that school districts spend less efficiently in areas in which they face little or no competition from other public schools, in large districts, and in areas in which residents are poor or less educated. One interpretation of these results is that increased competition has the potential to increase school efficiency in some areas.

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  • Lisa Barrow & Cecilia Elena Rouse, 2000. "Using market valuation to assess the importance and efficiency of public school spending," Working Paper Series WP-00-4, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-00-4
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    1. Fox, William F. & Gurley, Tami, 2006. "Will consolidation improve sub-national governments ?," Policy Research Working Paper Series 3913, The World Bank.
    2. Byron F. Lutz, 2006. "Taxation with representation: intergovernmental grants in a plebiscite democracy," Finance and Economics Discussion Series 2006-06, Board of Governors of the Federal Reserve System (U.S.).
    3. Lisa Barrow & Cecilia Elena Rouse, 2005. "Causality, causality, causality: the view of education inputs and outputs from economics," Working Paper Series WP-05-15, Federal Reserve Bank of Chicago.

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    Education;

    JEL classification:

    • O29 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Other
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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