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School Spending & Student Outcomes

The Effects of School Spending on Students’ Education and Earnings

School spending is a contentious issue in education, with some arguing it is ineffective and others advocating for more investments in education. But does school spending matter? In an IPR Working Paper, IPR economist Diane Whitmore Schanzenbach and Jesse Rothstein of the University of California-Berkeley examine whether school finance reforms and increased spending affected students’ education levels and earnings. To study the effects of increased spending, they identify 64 school finance reforms in 26 states between 1990 and 2011 and use data from the 2000–2018 American Community Survey to analyze earnings and labor outcomes of young adults who had varying exposure to school finance reforms. Schanzenbach and Rothstein find that post-1990, school finance reforms increased high school completion rates, college enrollment, and earnings. Black students and women gained the most from increased school spending. When Black students benefited from 10 years of school finance reforms, their high school graduation rates increased by 3.4 percentage points, and college attendance increased by 6.7 percentage points. For women, high school graduation rates increased by 3.2 percentage points and college attendance increased by 2.5 percentage points. While the debate over school spending continues, Schanzenbach and Rothstein show that increased spending leads to better life outcomes for students. Schanzenbach is the Margaret Walker Alexander Professor of Human Development and Social Policy.

The Effects of Early Government-Subsidized Preschools

The 1940 National Defense Housing Act, known as the Lanham Act, funded locally run “nursery schools” for about 300,000 children ages 2–6 from 1942–46 to assist mothers, many of whom went to work during World War II. In a new working paper, economist and IPR associate Joseph Ferrie and his colleagues examine the school books and appleeducational, socioemotional, and job outcomes of more than 360,000 students who grew up in places with access to Lanham preschools. They connect the students to a nationally representative study of high school students, Project Talent, which tracked students beginning in 1960 at 1, 5, and 11 years after high school. They then compared students who grew up in Lanham areas against those who did not. Their research shows that preschool effects were stronger for men who lived in a Lanham preschool area; they had improved high school academic outcomes. But the women who lived in such areas displayed less calmness in high school. The researchers point out that they are unable to separate the impact on the children of attending preschool from having a working mother, nor can they identify which aspects of the Lanham preschools were responsible for the outcomes they observe. Nevertheless, Ferrie and his colleagues interpret their findings with “some optimism” because even with the more rudimentary understanding of child development in the early 1940s, the Lanham preschools had “demonstrable, positive impacts on children that were discernible in their high school careers.” Ferrie is the Fitzgerald Professor of Economics and an IPR associate.

The Distribution of School Spending Impacts on Student Outcomes

In a working paper, IPR labor and education economist Kirabo Jackson and IPR graduate research assistant Claire Mackevicius conduct a meta-analysis of 31 studies to identify whether increased public K–12 school spending improves student outcomes and, if so, by how much. Jackson and Mackevicius include all credibly causal studies, those which identify the causal impact of changes in school spending on student outcomes. They only include studies of policy changes if it is clear that policy changed school spending. The researchers find that 28 studies, over 90%, show positive impacts of school spending on student outcomes. Across standardized outcomes, they find that when school spending increases by $1000 (in 2018 dollars) and continues over four years, high school graduation increases by 1.92 percentage points and college enrollment increases by 2.65 percentage points. Additionally, Jackson and Mackevicius uncover that school spending impacts educational attainment more than test scores, suggesting that only looking at test scores understates the long-term benefits of school spending. The benefits of increased capital spending take about 5 to 6 years to materialize, and the effects are about half as large as non-capital (instructional/operational) spending. A policy that increases school spending by $1000 per student for at least four years improves test scores and educational attainment over 91 percent of the time, clear evidence that money does matter. Jackson is the Abraham Harris Professor of Education and Social Policy.