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Do School Spending Cuts Matter? Evidence from The Great Recession

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Listed:
  • C. Kirabo Jackson
  • Cora Wigger
  • Heyu Xiong

Abstract

During The Great Recession, national public-school per-pupil spending fell by roughly seven percent, and took several years to recover. The impact of such large and sustained education funding cuts is not well understood. To examine this, first, we document that the recessionary drop in spending coincided with the end of decades-long national growth in both test scores and college-going. Next, we show that this stalled educational progress was particularly pronounced in states that experienced larger recessionary budget cuts for plausibly exogenous reasons. To isolate budget cuts that were unrelated to (a) other ill-effects of the recession or (b) endogenous state policies, we use states’ historical reliance on State taxes (which are more sensitive to the business cycle) to fund public schools interacted with the timing of the recession as instruments for reductions in school spending. Cohorts exposed to these spending cuts had lower test scores and lower college-going rates. The test score impacts were larger for children in poor neighborhoods. Evidence suggests that both test scores and college-going were more adversely affected for Black and White students than Latinx students.

Suggested Citation

  • C. Kirabo Jackson & Cora Wigger & Heyu Xiong, 2018. "Do School Spending Cuts Matter? Evidence from The Great Recession," NBER Working Papers 24203, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24203
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    Cited by:

    1. Gigliotti, Philip & Sorensen, Lucy C., 2018. "Educational resources and student achievement: Evidence from the Save Harmless provision in New York State," Economics of Education Review, Elsevier, vol. 66(C), pages 167-182.
    2. Michael Dinerstein & Troy D. Smith, 2021. "Quantifying the Supply Response of Private Schools to Public Policies," American Economic Review, American Economic Association, vol. 111(10), pages 3376-3417, October.
    3. María Orduz, 2022. "Effect of educational spending on academic performance under different institutional arrangements," Documentos CEDE 20224, Universidad de los Andes, Facultad de Economía, CEDE.
    4. Cordis, Adriana S. & Muzatko, Steven, 2021. "Higher education spending and CPA exam performance," Journal of Accounting Education, Elsevier, vol. 55(C).
    5. Fraenkel, Rebecca Cannon, 2022. "Local labor markets and job match quality: Teachers," Labour Economics, Elsevier, vol. 78(C).
    6. Angela Secrieru & Iulian Secrieru, 2022. "Financing The Education Sector In Crisis Situations From The Perspective Of Consolidating The Right To Education," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 16(1), pages 232-241.
    7. Buerger, Christian & Bifulco, Robert, 2019. "The effect of charter schools on districts’ student composition, costs, and efficiency: The case of New York state," Economics of Education Review, Elsevier, vol. 69(C), pages 61-72.
    8. Anderson, Michael L. & Gallagher, Justin & Ramirez Ritchie, Elizabeth, 2018. "School meal quality and academic performance," Journal of Public Economics, Elsevier, vol. 168(C), pages 81-93.
    9. Christopher Biolsi & Steven Craig & Amrita Dhar & Bent Sorensen, 2022. "Inequality in Public School Spending Across Space and Time," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 46, pages 244-279, October.
    10. Greaves, Ellen & Sibieta, Luke, 2019. "Constrained optimisation? Teacher salaries, school resources and student achievement," Economics of Education Review, Elsevier, vol. 73(C).
    11. Wodon, Quentin, 2022. "Global report on integral human development 2022: measuring the contributions of Catholic and other faith-based organizations to education, healthcare, and social protection," MPRA Paper 114809, University Library of Munich, Germany.
    12. C. Kirabo Jackson, 2018. "Does School Spending Matter? The New Literature on an Old Question," NBER Working Papers 25368, National Bureau of Economic Research, Inc.
    13. Cook, Jason & Lavertu, Stéphane & Miller, Corbin, 2021. "Rent-Seeking through collective bargaining: Teachers unions and education production☆," Economics of Education Review, Elsevier, vol. 85(C).
    14. Abott, Carolyn & Kogan, Vladimir & Lavertu, Stéphane & Peskowitz, Zachary, 2020. "School district operational spending and student outcomes: Evidence from tax elections in seven states," Journal of Public Economics, Elsevier, vol. 183(C).

    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • I2 - Health, Education, and Welfare - - Education
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J0 - Labor and Demographic Economics - - General

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