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Financial Deregulation, School Finance, and Student Achievement

This paper studies how school spending impacts student achievement by exploiting the US interstate branching deregulation as state tax revenue shocks. Leveraging school finance data from universal school districts, our difference-in-differences estimation reveals that deregulation leads to an increase in per-pupil total revenue and expenditure. The rise in revenue is primarily attributed to higher state revenues, while the expenditure increase is more prominent in low-income school districts. Using restricted-use student assessments from the Nation’s Report Card, we find that deregulation results in improved student achievement, with no distributional effects evident across students’ ability, race, or free lunch status. We introduce an instrumental variables approach that accounts for dynamic treatment effects and estimate that a one-thousand-dollar increase in per-pupil spending leads to a 0.035 standard deviation improvement in student achievement.

Keywords
Interstate branching deregulation; School spending; Student achievement
Education level
Tags
Document Object Identifier (DOI)
10.26300/k7ep-0t13
EdWorkingPaper suggested citation:
Yang, Xi, and Jian Zou. (). Financial Deregulation, School Finance, and Student Achievement. (EdWorkingPaper: -874). Retrieved from Annenberg Institute at Brown University: https://doi.org/10.26300/k7ep-0t13

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