PDF Three Essays on Resources in Education

THREE ESSAYS ON RESOURCES IN EDUCATION

by Alexandra M. Resch

A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy (Public Policy and Economics) in The University of Michigan 2008

Doctoral Committee: Professor Rebecca M. Blank, Chair Professor Paul N. Courant Professor John E. DiNardo Professor Brian A. Jacob Professor Jeffrey A. Smith

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Alexandra M. Resch 2008 All Rights Reserved

to my grandfather, Hugh K. Livesay, in appreciation for his many lessons on the limitless value of education

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ACKNOWLEDGEMENTS

First and foremost I would like to thank my dissertation committee -- Becky Blank, Paul Courant, John DiNardo, Brian Jacob, and Jeff Smith. Their mentorship and incredibly constructive criticism and advice have improved this research greatly.

I would also like to thank the members of the informal working group that helped clarify my research goals and provided countless hours of advice, support, and entertainment over the years -- Soren Anderson, Brian Cadena, Ben Keys, Brian Kovak and Jim Sallee. I hope we have many working lunches ahead of us, even if they're long distance.

Many other people contributed to the essays in this dissertation. Beth Brooks, Gloria Hancock, Nancy Resch, Peggy Smith, Yut'se Thomas, and Don White contributed data and institutional details that made the two essays on the Abbott reforms in New Jersey possible. In addition to my committee and working group, Sheldon Danziger, Lucas Davis, Jim Hines and many seminar participants contributed helpful comments and critiques.

The third essay is coauthored with Jim Sallee and Paul Courant; this paper would not have been possible without them. We thank Soren Anderson, John Bound, Brian Cadena, Jim Hines, Ben Keys, Mike McPherson, Michael Rothschild, Jeff Smith, Sarah Turner and seminar participants at the University of Virginia and the University of Michigan for their comments and critiques. We also thank Caroline Hoxby and two anonymous referees for excellent comments.

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Finally, I'd like to thank all the people who helped make grad school, and especially this last year, a lot more pleasant. The National Poverty Center has given me a happy home on campus for the last four years and I look forward to continuing the friendships I made there. For their constant support and timely distractions, I thank Emily Gustafsson-Wright, Sarah Marsh and Robin Phinney. I thank Regina Benson, Jaime Llewellyn and Karen Munday for still being my friends even though I never have time to call. I thank Zingerman's for feeding me this last year when I haven't had time to cook. Most of all I want to thank my parents, Peter and Nancy, and sister, Ingrid, for their unfailing support and encouragement, and the occasional Zingerman's gift cards.

I would also like to acknowledge generous financial support from the National Science Foundation, Rackham Graduate School, and the Spencer Foundation.

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TABLE OF CONTENTS

DEDICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

LIST OF FIGURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

LIST OF TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii

CHAPTER

I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. The Effects of the Abbott School Finance Reform on Education Expenditures in New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Background: The Abbott Reform and School Finance in

New Jersey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.2.1 Legal Challenges to NJ School Finance . . . . . . . . . . . . . . . . 8 2.2.2 The Current Finance System in NJ . . . . . . . . . . . . . . . . . . 11 2.2.3 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.2.4 Selection of a Comparison Group . . . . . . . . . . . . . . . . . . . 15

2.3 Previous Literature and Predictions . . . . . . . . . . . . . . . . . . . . . . . 18 2.4 Empirical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

2.4.1 Difficulties in Estimation . . . . . . . . . . . . . . . . . . . . . . . . 22 2.4.2 Empirical Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.4.3 Effects on Total Expenditures, or the Flypaper Effect . . . . . . . . 28 2.4.4 Crowd-Out of Other Funding . . . . . . . . . . . . . . . . . . . . . 31 2.4.5 Expenditure Results . . . . . . . . . . . . . . . . . . . . . . . . . . 32 2.4.6 Timing of the Expenditure Effects . . . . . . . . . . . . . . . . . . 37 2.5 Discussion and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 2.6 Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.7 Data Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 2.7.1 Data Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 2.7.2 Alternate Sample Selection in Table 2.5 . . . . . . . . . . . . . . . 65

III. New Evidence on School Funding and Student Achievement . . . . . . . . 67

3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 3.2 The Abbott Case and School Finance in New Jersey . . . . . . . . . . . . . . 72

3.2.1 The Abbott IV Ruling Increased Funding to Abbott Districts . . . 73 3.2.2 Did the Policy Affect Actual Expenditures? . . . . . . . . . . . . . 74 3.2.3 Expected Effects of Additional Spending . . . . . . . . . . . . . . . 75

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3.3 Data and Empirical Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 3.3.1 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 3.3.2 Comparison Group . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 3.3.3 Characteristics of Sample and Patterns in Outcome Variables . . . 79 3.3.4 Estimation Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . 81

3.4 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 3.4.1 The Abbott Reform Increased Math Achievement . . . . . . . . . . 84 3.4.2 The Abbott Reform Increased Math and Reading Performance for Black and Hispanic Students . . . . . . . . . . . . . . . . . . . . . . 87 3.4.3 Other District-Level Outcomes - Enrollment, Attendance, SATs . . 89 3.4.4 Effects on Mediating Variables at the District Level . . . . . . . . . 91 3.4.5 Trends in Earlier Grades . . . . . . . . . . . . . . . . . . . . . . . . 93

3.5 Discussion and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 3.5.1 Are the Effects Too Large? . . . . . . . . . . . . . . . . . . . . . . 95 3.5.2 Why Doesn't the Effect Increase Over Time? . . . . . . . . . . . . 96 3.5.3 Are the Effects Worth the Money Spent? . . . . . . . . . . . . . . . 98 3.5.4 Does Money Matter and What Do We Learn from Abbott? . . . . 99

3.6 Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 3.7 Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 3.8 Data Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

3.8.1 National Center for Education Statistics Data . . . . . . . . . . . . 115 3.8.2 New Jersey Department of Education Data . . . . . . . . . . . . . 115 3.8.3 National Assessment of Educational Progress (NAEP) data . . . . 117

IV. On the Optimal Allocation of Students and Resources in a System of Higher Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 4.2 A Description of the Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 4.3 The Optimal Allocation When the Number of Universities is Fixed . . . . . 126 4.4 The Optimal Number of Universities . . . . . . . . . . . . . . . . . . . . . . 131 4.5 Extensions and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 4.6 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 4.7 Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143

V. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

BIBLIOGRAPHY

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LIST OF FIGURES

Figure 2.1 Parity Aid by Abbott Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.2 Existing School Finance System in New Jersey . . . . . . . . . . . . . . . . . . . . 44 2.3 Map of Abbott and Comparison Districts . . . . . . . . . . . . . . . . . . . . . . . 45 2.4 All State Compensatory Aid by Abbott Status . . . . . . . . . . . . . . . . . . . . 46 2.5 Property Tax Levy Per Pupil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 2.6 Total Effective Property Tax Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 2.7 Number of Principals per 1000 Students . . . . . . . . . . . . . . . . . . . . . . . . 47 2.8 Number of Elementary School Teachers per 1000 Students . . . . . . . . . . . . . . 48 2.9 Number of High School English Teachers per 1000 Students . . . . . . . . . . . . . 48 2.10 Number of High School Math Teachers per 1000 Students . . . . . . . . . . . . . . 49 2.11 Number of High School Arts Teachers per 1000 Students . . . . . . . . . . . . . . . 49 2.12 Number of High School Music Teachers per 1000 Students . . . . . . . . . . . . . . 50 2.13 Number of High School Reading and Speech Specialists per 1000 Students . . . . . 50 3.1 Parity Aid by Abbott Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 3.2 Average Math and Reading Scale Scores by Abbott Status . . . . . . . . . . . . . . 102 3.3 Average Math and Reading Scale Scores by Race and Abbott Status . . . . . . . . 103 3.4 Average Proficiency Rates on Fourth Grade Math Assessment by Abbott Status . 104 3.5 Average Proficiency Rates on Fourth Grade Reading Assessment by Abbott Status 104 3.6 Average Proficiency Rates on Eighth Grade Math Assessment by Abbott Status . . 105 3.7 Average Proficiency Rates on Eighth Grade Reading Assessment by Abbott Status 105 4.1 Resources per Student as a Function of Student Ability . . . . . . . . . . . . . . . 143 4.2 Total Output versus Total Resources for Several Values of K . . . . . . . . . . . . 144 4.3 Numerically Estimated Optimal Values of A0 and AK for Selected and . . . . 144 4.4 Flagship SAT Scores versus Number of Universities in State . . . . . . . . . . . . 145 4.5 Flagship Admissions Acceptance versus Number of Universities in State . . . . . . 146

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