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The Equilibrium Effects of Public Provision in Education Markets: Evidence from a Public School Expansion Policy
Author(s):
Michael Dinerstein, University of Chicago and NBER
Christopher Neilson, Princeton University and NBER
Sebastian Otero, Stanford University
Abstract:

In markets with private options, the optimal level of public provision may require balancing a tradeoff between reducing private options’ market power with the possibility of crowding out potentially high-quality products. These considerations are particularly relevant in many developing countries’ education systems where state capacity is increasing but low levels of past public provision mean many private schools already exist. Dinerstein, Neilson, and Otero study the equilibrium effects of public provision in the context of a large expansion of public schools in the Dominican Republic. Over a five-year period, the government aimed to increase the number of public school classrooms by 78%. Using an event study framework, the researchers estimate the effect of a new public school on neighborhood outcomes and competing private schools, where they instrument for how quickly the public school construction project finished with the characteristics of the contractor randomly assigned to build the project. They find that a new public school increased public sector enrollment significantly. As public enrollment increased, a large number of private schools closed while the surviving schools lowered prices and increased school quality. To study how the level of public provision affects the overall level of quality in the market, the researchers specify and estimate an empirical model of demand (students choosing schools) and supply (schools choosing whether to enter, stay open and what price to charge). Researchers use the model estimates to calculate the level of public provision that maximizes learning. Due to equilibrium competitive effects, they find that the optimal level is non-monotonic in the quality of the increased public schooling.

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Teacher Compensation and Structural Inequality: Evidence from Centralized Teacher School Choice in Peru
Author(s):
Christopher Neilson, Princeton University and NBER
Matteo Bobba, Toulouse School of Economics
Gianmarco Leon-Ciliotta, Universitat Pompeu Fabra
Marco G. Nieddu, University of Cagliari
Tim Ederer, University of Toulouse
Abstract:

Neilson, Bobba, León, Nieddu, and Ederer study how increasing teacher compensation at hard-to-staff schools can reduce structural inequality in the access to high-quality teachers. Using rich administrative data from Perú, they document dramatic inequities in schooling inputs and teacher quality to which students have access. Using a regression discontinuity design, the resarchers show that a 25% increase in teacher pay at less desirable public schools attracts better quality applicants and improves subsequent student test scores. To quantify how teachers trade-off local amenities and compensation, they estimate a model of teacher school choice using detailed job posting and application data from the country-wide centralized teacher assignment system. The researchers use the model to decompose the factors that drive teachers' labor supply
and to approximate the cost-effectiveness of alternative policies. The results suggest that targeted pay increases can help reduce spatial inequalities in the access to quality education. The results also indicate that current pay in less desirable regions is woefully insufficient to compensate teachers for the lack of school and community amenities. Model estimates suggest that a more cost-effective policy to attract better quality teachers in these less desirable regions is to invest in other schooling infrastructure and invest in training new teachers from these locations.

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School District Revenue Shocks, Resource Allocations, and Student Achievement: Evidence from the Universe of U.S. Wind Energy Installations
Author(s):
Eric Brunner, University of Connecticut
Ben Hoen, Lawrence Berkeley National Laboratory
Joshua M. Hyman, Amherst College
Abstract:

Brunner, Hoen, and Hyman examine the impact of wind energy installation on school district finances and student achievement using data on the timing, location, and capacity of the universe of US installations from 1995 through 2017. Wind energy installation led to large, exogenous increases in local revenues to school districts, with only minimal offsetting reductions in state aid. Expenditures increased accordingly, causing dramatic increases in capital outlays, but only modest increases in current spending, and little to no change in class sizes or teacher salaries. The researchers find zero impact of wind energy installation on student test scores. Using administrative data from Texas, the country's top wind energy producer, theys replicate the national results, and also find zero impact of wind energy installation on high school completion and other longer-run student outcomes.

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State Investment in Higher Education: Effects on Human Capital Formation, Student Debt, and Long-term Financial Outcomes of Students
Author(s):
Rajashri Chakrabarti, Federal Reserve Bank of New York
Nicole Gorton, University of California, Los Angeles
Michael F. Lovenheim, Cornell University and NBER
Abstract:

Most public colleges and universities rely heavily on state financial support. As state budgets have tightened in recent decades, appropriations for higher education have declined substantially. Despite concerns expressed by policymakers and scholars that the declines in state support have reduced the return to education investment for public sector students, little evidence exists that can identify the causal effect of these funds on long-run outcomes. Chakrabarti, Gorton, and Lovenheim present the first such analysis in the literature using new data that leverages the merger of two rich datasets: consumer credit records from the New York Fed's Consumer Credit Panel (CCP) sourced from Equifax and administrative college enrollment and attainment data from the National Student Clearinghouse. The researchers overcome identification concerns related to the endogeneity of state appropriation variation using an instrument that interacts the baseline share of total revenue that comes from state appropriations at each public institution with yearly variation in state-level appropriations. The analysis is conducted separately for two-year and four-year students, and we analyze individuals into their mid-30s. For four-year students, the researchers find that state appropriation increases lead to substantially lower student debt originations. They also react to appropriation increases by shortening their time to degree, but they find little effect on other outcomes. In the two-year sector, state appropriation increases lead to more collegiate and post-collegiate educational attainment, more educational debt consistent with the increased educational attainment, but lower likelihood of delinquency and default. State support also leads to more car and homeownership with lower adverse debt outcomes, and these students experience substantial increases in their credit score and in the affluence of the neighborhood in which they live. Examining mechanisms, the researchers find state appropriations are passed on to students in the form of lower tuition in the four-year sector with no institutional spending response. For community colleges, they find evidence of both price and quality mechanisms, the latter captured in higher educational resources in key spending categories. The results are consistent with the different pattern of effects the researchers document in the four-year and two-year sectors. The results underscore the importance of state support for higher education in driving student debt outcomes and the long-run returns to postsecondary investments students experience.

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This paper was distributed as Working Paper 27885, where an updated version may be available.

Inducing Positive Sorting through Performance Pay: Experimental Evidence from Pakistani Schools
Author(s):
Christina L. Brown, University of Chicago
Tahir Andrabi, Pomona College
Abstract:

Attracting and retaining high-quality teachers has a large social benefit, but it is challenging for schools to identify good teachers ex-ante. Brown and Andrabi use teachers' contract choices and a randomized controlled trial of performance pay with 7,000 teachers in 243 private schools in Pakistan to study whether performance pay affects the composition of teachers. Consistent with adverse selection models, they find that performance pay induces positive sorting: both high value-added teachers and teachers who respond more strongly to incentives significantly prefer performance pay and sort into these schools. Teachers also have more information about their quality than their principals. Using two additional treatments, the researchers show effects are more pronounced among teachers with more information about their quality and teachers with lower switching costs. Accounting for these sorting effects, the total effect of performance pay on test scores is twice as large as the direct effect on the existing stock of teachers, suggesting that analyses that ignore sorting effects may substantially understate the effects of performance pay.

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Inequality in Household Adaptation to Schooling Shocks: Covid-Induced Online Learning Engagement in Real Time
Author(s):
Andrew Bacher-Hicks, Boston University
Joshua Goodman, Boston University and NBER
Christine Mulhern, RAND Corporation
Abstract:

Bacher-Hicks, Goodman, and Mulhern use high frequency internet search data to study in real-time how US households sought out online learning resources as schools closed due to the Covid-19 pandemic. By April 2020, nationwide search intensity for both school- and parent-centered online learning resources had roughly doubled relative to pre-Covid levels. Areas of the country with higher income, better internet access, and fewer rural schools saw substantially larger increases in search intensity. The pandemic will likely widen achievement gaps along these dimensions given schools' and parents' differing engagement with online resources to compensate for lost school-based learning time. Accounting for such differences and promoting more equitable access to online learning could improve the effectiveness of education policy responses to the pandemic. The public availability of internet search data allows the analyses to be updated when schools reopen and to be replicated in other countries.

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This paper was distributed as Working Paper 27555, where an updated version may be available.

Regulatory Arbitrage in Teacher Hiring and Retention: Evidence from Massachusetts Charter Schools
Author(s):
Jesse M. Bruhn, Brown University
Scott A. Imberman, Michigan State University and NBER
Marcus A. Winters, Boston University
Abstract:

Bruhn, Imberman, and Winters study personnel flexibility in charter schools by exploring how teacher retention varies with teacher and school quality in Massachusetts. Charters are more likely to lose their highest and lowest value-added teachers. Low performers tend to exit public education, while high performers tend to switch to traditional public schools. To rationalize these findings, the researchers propose a model in which educators with high fixed-costs use charter schools to explore teaching careers before obtaining licenses required for higher-paying public sector jobs. The model suggests charter schools create positive externalities for traditional public schools by increasing the average quality of available teachers.

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This paper was distributed as Working Paper 27607, where an updated version may be available.

Diversity in Schools: Immigrants and the Educational Performance of U.S. Born Students
Author(s):
David N. Figlio, Northwestern University and NBER
Paola Giuliano, University of California, Los Angeles and NBER
Riccardo Marchingiglio, Northwestern University
Paola Sapienza, Northwestern University and NBER
Umut Özek, American Institutes for Research
Abstract:

Figlio, Giuliano, Marchingiglio, Sapienza, and Özek study the effect of exposure to immigrant peers on the educational outcomes of US-born students, using a unique dataset combining birth records and population-level administrative data from the Florida Department of Education. They focus on the cumulative cohort-school-specific exposure to foreign-born students throughout the students' educational career and they identify the parameter of interest by comparing siblings' performances in standardized test scores in mathematics and reading. The researchers find evidence of a large selection into schools, especially among White and affluent students, that poses an identification threat to this research question. Using an identification strategy to partial out the unobserved non-random selection into schools, the researchers find that the presence of immigrant students correlates positively with the academic achievement of US-born students, especially the disadvantaged ones. Moreover, the presence of immigrants does not affect negatively the performance of affluent US-born students, who typically show a higher academic achievement compared to their immigrant peers. The researchers provide suggestive evidence on potential channels.

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Suspending Suspensions: The Education Production Consequences of School Suspension Policies
Author(s):
Nolan G. Pope, University of Maryland
George W. Zuo, University of Maryland
Abstract:

Managing student behavior is integral to the education production process. Over the past halfcentury, a common but controversial approach has been to suspend disruptive students from the classroom, creating potential tradeoffs between disciplined students and their peers. Pope and Zuo study these tradeoffs by modeling and estimating how changes in school suspension policies impact student performance and teacher turnover. They use administrative data from the Los Angeles Unified School District, where suspension rates fell by over 90 percent since 2003. They instrument for school suspension rates by interacting districtwide suspension rate changes with initial school suspension rate levels. The results indicate that a reduction in suspension rates decreases math and English test scores, decreases GPAs, and increases absences. Teacher turnover also increases, particularly for inexperienced teachers. The overall negative impact of reducing suspension rates is driven by small but diffuse spillovers produced by more lenient disciplinary environments. These spillovers are only partially offset by large and concentrated benefits for the small number of students who are no longer suspended.

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Making Teaching Last: Long- and Short-Run Value-Added
Author(s):
Michael Gilraine, New York University and NBER
Nolan G. Pope, University of Maryland
Abstract:

Recent research indicates that teachers with high value-added (VA) improve their students' later life outcomes, leading to VA measures featuring ever more widely in high-stakes decision-making. Yet concerns remain that VA measures might capture undesirable dimensions of learning such as rote memorization that are unlikely to contribute to a student's lifelong success. Gilraine and Pope separate test score value-added measure into two components: long-run VA, which persists to the following year, and short-run VA, which does not. They find that students assigned to high long-run VA teachers fare substantially better in terms of long-run outcomes. In contrast, students assigned to high short-run VA teachers do not perform any better in terms of long-run outcomes. The researchers also find that long-run VA is correlated with non-cognitive VA measures, whereas short-run VA is not. Policy simulations indicate that the use of long-run VA improves policy effectiveness by a factor of two over traditional VA measures.

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Participants

Jorge Aguero, University of Connecticut
Desmond Ang, Harvard University
Michael D. Bates, University of California at Riverside
Valentin Bolotnyy, Stanford University
Christina L. Brown, University of Chicago
Lavar C. Edmonds, Stanford University
Rob Garlick, Duke University
Douglas N. Harris, Tulane University
Ben Hoen, Lawrence Berkeley National Laboratory
David Johnson, Wilfrid Laurier University
Mike Kofoed, United States Military Academy at West Point
Sarah A G. Komisarow, Duke University
Matthew A. Kraft, Brown University
Priya Mukherjee, University of Wisconsin-Madison
Minh Nguyen, Ball State University
Ben Ost, University of Illinois at Chicago
Sebastian Otero, Stanford University
Javaeria A. Qureshi, University of Illinois at Chicago
Allen Ruby, Department of Education
Wayne A. Sandholtz, Nova School of Business and Economics
Trudie Schils, Maastricht University
Gauri Kartini Shastry, Wellesley College
Larry Singell, University of Texas at Austin
Austin C. Smith, Miami University
Sandor Sovago, Vrije Universiteit Amsterdam
Bas van der Klaauw, VU University Amsterdam
George W. Zuo, University of Maryland
Sharon Xuejing Zuo, Fudan University

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