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Discussion of the rising price of higher education and associated student debt in America has been a key feature of political discourse in recent memory, with renewed interest sparked by the announcement of the student loan forgiveness plan. Federal student debt has increased by 756% since 1995, and total student debt tripled from 2007 to 2022. Concurrently, state support for public universities fell by 18% from 2000 to 2015. This phenomenon has drawn interest in the literature, with works by Jaquette and Curs (2015), Bound et al. (2016), Deming and Walters (2017), Webber (2017), and Mathias (2022) examining the effect of state disinvestment on higher education pricing and enrollment. This paper uses data from IPEDS to examine Colorado's College Opportunity Fund, which eliminated state appropriations to Colorado universities in 2006. I advance the literature by being the first to employ quasi-experimental methods, using a synthetic control identification strategy to measure the impact of this funding shock on enrollment and tuition revenue recuperation by Colorado universities. I find that Hispanic enrollment increased by 3 percentage points relative to the synthetic counterfactual, and that tuition revenue increased by 42% as a result of the policy. These results are robust to threats to identification, and placebo tests conrm the validity of the design. These findings provide robust evidence of the pitfalls of state disinvestment in higher education, and the consequences for students who are left to foot the bill.
College attendance has increased significantly over the last few decades, but dropout rates remain high, with fewer than half of all adults ultimately obtaining a postsecondary credential. This project investigates whether one-on-one college coaching improves college attendance and completion outcomes for former low- and middle-income income state aid recipients who attended college but left prior to earning a degree. We conducted a randomized control trial with approximately 8,000 former students in their early- to mid-20s. Half of participants assigned to the treatment group were offered the opportunity to receive coaching services from InsideTrack, with all communication done remotely via phone or video. Intent-to-treat analyses based on assignment to coaching shows no impacts on college enrollment and we can rule out effects larger than a two-percentage point (5%) increase in subsequent Fall enrollment.
The factors that influenced school districts’ decisions to offer virtual, hybrid, or in-person instruction during the 2020-21 school year—the first full school year after the emergence of the COVID-19 pandemic—have been the focus of a large body of research in recent years. Some of this research examines the influence of school spending, among other factors; however, these studies do not consider spending in relation to cost, “cost” being the amount needed for a school district to achieve a given outcome. This paper uses a measure of adequacy, which is the amount of spending under or over estimated cost, to determine whether spending correlates with the amount of time a school district offered virtual instruction. We find spending adequacy significantly and substantially predicts time spent in virtual instruction: for every $1,000 positive change in adequacy (closing a gap and/or adding to a surplus), the time spent in virtual schooling decreases 0.6%. A one standard deviation positive change in adequacy, therefore, results in 7.5 fewer days of virtual instruction. While our findings are descriptive, they do require future researchers to consider school spending adequacy, as much as any other factor, as a predictor of pandemic instructional models.
We study the effects of increased school spending in rural American school districts by leveraging the introduction and subsequent expansion of Wisconsin’s Sparsity Aid Program. We find that the program, which provides additional state funding to small and isolated school districts, increased spending in eligible districts by 2% annually and that districts primarily allocated funds to areas with low baseline budget shares. This increased spending has little effect on standardized test scores, but modestly increases college enrollment and completion for students with a low likelihood of attending or completing college.
Current public pension funding policy has arguably failed on both theoretical and empirical grounds. The traditional actuarial approach elides the risk-return tradeoff at the heart of finance economics and has resulted in steadily rising contribution rates, instead of a sustainable steady state. We propose an economic reformulation of funding policy integrating: (1) steady-state determination of the expected contribution rate, based on an expected return on risky assets and a target funded ratio based on a low-risk discount rate for liabilities; (2) adjustment parameters to achieve convergence toward steady state; and (3) determination of target funded ratio based on policymakers’ revealed preference toward risk, by their choice of asset allocation under a simplified objective function. This provides a new understanding of the basis for pre-funding, in which the perceived net benefits of risky investment may far outweigh the traditional Samuelsonian rationale. Specifically, we find that convexity of the long-run risk-return relationship should lead more risk-tolerant policymakers to pursue higher target funded ratios. We believe our analysis provides the basis for reformulating contribution policy in a way that better supports sustainability and more coherently conveys the tradeoffs consistent with finance economics, and as evaluated by policymakers.
Despite the growing popularity of free college proposals, countries with higher college subsidies tend to have higher enrollment rates but not higher graduation rates. To capture this evidence and evaluate potential free college policies, we rely on a dynamic model of college enrollment, performance, and graduation estimated using rich student-level data from Colombia. In the model, student effort affects class completion and mitigates the risk of performing poorly or dropping out. Among our simulated policies, universal free college expands enrollment the most but has virtually no effect on graduation rates, helping explain the cross-country evidence. Performance-based free college triggers a more modest enrollment expansion but delivers a higher graduation rate at a lower fiscal cost. While both programs lower student uncertainty relative to the baseline, performance-based free college does it to a lower extent, which in turn promotes better student outcomes. Overall, free college programs expand enrollment but have limited impacts on graduation and attainment due to their limited impact on student effort.
The impact of school resources on student outcomes was first raised in the 1960s and has been controversial since then. This issue enters into the decision making on school finance in both legislatures and the courts. The historical research found little consistent or systematic relationship of spending and achievement, but this research frequently suffers from significant concerns about the underlying estimation strategies. More recent work has re-opened the fundamental resource-achievement relationship with more compelling analyses that offer stronger identification of resource impacts. A thorough review of existing studies, however, leads to similar conclusions as the historical work: how resources are used is key to the outcomes. At the same time, the research has not been successful at identifying mechanisms underlying successful use of resources or for ascertaining when added school investments are likely to be well-used. Direct investigations of alternative input policies (capital spending, reducing class size, or salary incentives for teachers) do not provide clear support for such specific policy initiatives.
A major challenge for states is determining how to support lower levels of government experiencing fiscal or performance challenges without incentivizing future financial mismanagement. Though classical liberal economics tradition argues that decentralization encourages fiscal responsibility, more recent work on fiscal federalism suggests that decentralization could instead encourage fiscal irresponsibility. In this paper, we study one key example of political centralization in the context of public education—state takeovers of local school districts—and its impact on the fiscal condition of the targeted districts. Using event study methods, we find takeovers from 1990 to 2019 increased annual school spending by roughly $2,000 per pupil after five years, leading to improvements in financial condition. Further examination of mechanisms suggests that increased funding was used for employee benefits and debt retirement and came primarily from state sources. The effects on spending were larger when accompanied by accountability mechanisms, and when they occurred in larger districts and districts with higher baseline debt levels. Takeover was less impactful for districts serving higher concentrations of Black students.
Recent public discussions and legal decisions suggest that school segregation will remain persistent in the United States, but increased transparency may help monitor spending across schools. These circumstances revive an old question: is it possible to achieve an educational system that is separate but equal—or better—in terms of spending? This question motivates further understanding the measurement of spending progressivity and its association with segregation. Focusing on economic disadvantage, we compare two commonly-used measures of spending progressivity: exposure-based and slope-based. We show that each measure is predicated on different assumptions about the progressivity of within-school resource allocations, and that they are theoretically linked through segregation. We empirically examine school spending progressivity and its properties using nationwide school spending data from the 2018-19 school year. Consistent with our theory, the exposure-based measure is the slope-based measure shrunk inversely by economic school segregation. This property makes more segregated school districts look more progressive on the exposure-based measure, representing a seemingly “separate but better” relationship. However, we show that this provocative pattern may be reversed by relatively modest poor-versus-nonpoor differences in unobserved parental contributions. We discuss implications for the measurement of progressivity, and for theory on public educational investments broadly.
How far is the world away from ensuring that every child obtains the basic skills needed to be internationally competitive? And what would accomplishing this mean for world development? Based on the micro data of international and regional achievement tests, we map achievement onto a common (PISA) scale. We then estimate the share of children not achieving basic skills for 159 countries that cover 98.1% of world population and 99.4% of world GDP. We find that at least two-thirds of the world’s youth do not reach basic skill levels, ranging from 24% in North America to 89% in South Asia and 94% in Sub-Saharan Africa. Our economic analysis suggests that the present value of lost world economic output due to missing the goal of global universal basic skills amounts to over $700 trillion over the remaining century, or 11% of discounted GDP.