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Finance

Virginia S. Lovison, Cecilia H. Mo.

While investing in the teacher workforce is central to improving schools, school resources are notoriously limited, forcing school leaders to make difficult decisions on how to prioritize funds. This paper examines a critical input to resource allocation decisions: teacher preferences. Using an original, online discrete choice survey experiment with a national sample of 1,030 U.S. teachers, we estimate how much teachers value different features of a hypothetical teaching job. The findings show that (a) teachers value access to special education specialists, counselors, and nurses more than a 10% salary increase or 3-student reduction in class size, (b) investments in school counselors and nurses are strikingly cost-effective, as the value teachers alone place on each of these support roles far exceeds the per teacher cost of funding these positions, and (c) teachers who are also parents treat a 10% salary increase and a child care subsidy of similar value as near perfect substitutes. These novel estimates of teachers’ willingness to pay for student-based support professionals challenge the idea that inadequate compensation lies at the root of teacher workforce challenges and illustrate that reforms that exclusively focus on salary as a lever for influencing teacher mobility (e.g. transfer incentives) may be poorly aligned to teachers’ preferences.

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Michel Grosz, Ross T. Milton.

We study a California policy that loosened constraints on some local governments by lowering the share of votes required to pass school capital improvement bond referendums. We show that the policy change yielded larger tax proposals that received less support from voters, yet led to a doubling of approved spending. We show that this effect is concentrated in more racially diverse jurisdictions and that loosening these electoral constraints completely closed the gap in funding between these areas. We develop an agenda-setter model of the interaction between local government officials and voters to illustrate potential mechanisms behind these results.

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Ishtiaque Fazlul, Cory Koedel, Eric Parsons.

We develop a new framework for identifying at-risk students in public schools. Our framework has two fundamental advantages over status quo systems: (1) it is based on a clear definition of what it means for a student to be at risk and (2) it leverages states’ rich administrative data systems to produce more informative risk measures. Our framework is more effective than common alternatives at identifying students who are at risk of low academic performance and we use policy simulations to show that it can be used to target resources toward these students more efficiently. It also offers several other benefits relative to status quo systems. We provide an alternative approach to risk measurement that states can use to inform funding, accountability, and other policies, rather than continuing to rely on broad categories tied to the nebulous concept of “disadvantage.”

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Riley Acton.

In the competitive U.S. higher education market, institutions differentiate themselves to attract both students and tuition dollars. One understudied example of this differentiation is the increasing trend of "colleges" becoming "universities" by changing their names. Leveraging variation in the timing of such conversions in an event study framework, I show that becoming a university increases enrollments at both the undergraduate and graduate levels, which leads to an increase in degree production and total revenues. I further find that these effects are largest when institutions are the first in their market to convert to a university and can lead to negative spillover effects on non-converting colleges.

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J. Cameron Anglum, Kenneth A. Shores, Matthew P. Steinberg.

In 2009, the federal government passed the American Recovery and Reinvestment Act (ARRA) to combat the effects of the Great Recession and state revenue shortfalls, directing over $97 billion to school districts. In this chapter, we draw lessons from this distribution of fiscal stimulus funding to inform future federal intervention in school finance during periods of economic downturn. We find that district spending declined by $945 per pupil per year following the Great Recession, particularly after a stimulus funding cliff when ARRA funding declined. Spending declines varied more within than across states, while stimulus funding was directed to districts through pre-Recession state funding formulae which varied in their relative progressivity. Spending losses were greater in districts serving fewer shares of students qualifying for free or reduced-price lunch or special education services, in districts with higher-achieving students, and in districts with greater levels of spending prior to the Great Recession; declines were unassociated with district’s racial/ethnic composition, the share of English language learners, or a district’s reliance on state aid. We conclude by identifying different stimulus policy targets and with recommendations regarding the magnitude and distribution of future federal fiscal stimulus funding, lessons relevant to the COVID-19-induced recession and beyond.

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Kenneth A. Shores, Hojung Lee, Elinor Williams.

Levels of governance (the nation, states, and districts), student subgroups (racially and ethnically minoritized and economically disadvantaged students), and types of resources (expenditures, class sizes, and teacher quality) intersect to represent a complex and comprehensive picture of K-12 educational resource inequality. Drawing on multiple sources of the most recently available data, we describe inequality in multiple dimensions. At the national level, racially and ethnically minoritized and economically disadvantaged students receive between $30 and $800 less in K-12 expenditures per pupil than White and economically advantaged students. At the state and district levels, per-pupil expenditures generally favor racially and ethnically minoritized and economically disadvantaged students compared to White and economically advantaged students. Looking at nonpecuniary resources, minoritized and economically disadvantaged students have smaller class sizes than their subgroup counterparts in the average district, but these students also have greater exposure to inexperienced teachers. We see no evidence that district-level spending in favor of traditionally disadvantaged subgroups is explained by district size, average district spending, teacher turnover, or expenditures on auxiliary staff, but Black and Hispanic spending advantage is correlated with the relative size of the Black and Hispanic special education population.

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Dillon Fuchsman, Josh B. McGee, Gema Zamarro.

Adequately saving for retirement requires both planning and knowledge about available retirement savings options. Teachers participate in a complex set of different plan designs and benefit tiers, and many do not participate in Social Security. While teachers represent a large part of the public workforce, relatively little is known regarding their knowledge about and preparation for retirement. We administered a survey to a nationally representative sample of teachers through RAND’s American Teacher Panel and asked teachers about their retirement planning and their employer-sponsored retirement plans. We find that while most teachers are taking steps to prepare for retirement, many teachers lack the basic retirement knowledge necessary to plan effectively. Teachers struggled to identify their plan type, how much they are contributing to their plans, retirement eligibility ages, and who contributes to Social Security. These results suggest that teacher retirement reform may not be disruptive for teachers and that better, simpler, and clearer information about teacher retirement plans would be beneficial.

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Dylan Lukes, Christopher Cleveland.
Between 1935-1940 the Home Owners' Loan Corporation (HOLC) assigned A (minimal risk) to D (hazardous) grades to neighborhoods that reflected their lending risk from previously issued loans and visualized these grades on color-coded maps, which arguably influenced banks and other mortgage lenders to provide or deny home loans within residential neighborhoods. In this study, we leverage a spatial analysis of 144 HOLC-graded core-based statistical areas (CBSAs) to understand how HOLC maps relate to current patterns of school and district funding, school racial diversity, and school performance. We find that schools and districts located today in historically redlined D neighborhoods have less district per-pupil total revenues, larger shares of Black and non-White student bodies, less diverse student populations, and worse average test scores relative to those located in A, B, and C neighborhoods. Conversely, at the school level, we find that per-pupil total expenditures are better for those schools operating in previously redlined D neighborhoods. Consequently, these schools also have the largest shares of low-income students. Our nationwide results are, on the whole, consistent by region and after controlling for CBSA. Finally, we document a persistence in these patterns across time, with overall positive time trends regardless of HOLC security rating but widening gaps between D vs. A, B, and C outcomes. These findings suggest that education policymakers need to consider the historical implications of redlining and past neighborhood inequality on neighborhoods today when designing modern interventions focused on improving the life outcomes of students of color and students from low-socioeconomic backgrounds.

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Matthew P. Steinberg, Haisheng Yang.

Principals shape the academic setting of schools. Yet, there is limited evidence on whether principal professional development improves schooling outcomes. Beginning in 2008-09, Pennsylvania’s Inspired Leadership (PIL) induction program required that newly hired principals complete targeted in-service professional development tied to newly established state leadership standards within five years of employment. Using panel data on all Pennsylvania students, teachers, and principals, we leverage variation in the timing of PIL induction across principal-school cells and employ difference-in-differences and event study strategies to estimate the impact of PIL induction on teacher and student outcomes. We find that PIL induction increased student math achievement through improvements in teacher effectiveness, and that the effects of PIL induction on teacher effectiveness were concentrated among the most economically disadvantaged and urban schools in Pennsylvania. Principal professional development had the greatest impact on teacher effectiveness when principals completed PIL induction during their first two years in the principalship. We also find evidence that teacher turnover declined in the years following the completion of PIL induction. We discuss the implications of our findings for principal induction efforts.

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Lucy C. Sorensen, Montserrat Avila Acosta, John Engberg, Shawn D. Bushway.

U.S. public school students increasingly attend schools with sworn law enforcement officers present. Yet, little is known about how these school resource officers (SROs) affect school environments or student outcomes. Our study uses a fuzzy regression discontinuity (RD) design with national school-level data from 2014 to 2018 to estimate the impacts of SRO placement. We construct this discontinuity based on the application scores of nearby police agencies for federal school-based policing grants. We find that SROs do effectively reduce some forms of violence in schools, but do not prevent school shootings or gun-related incidents. We also find that SROs intensify the use of suspensions, expulsions, police referrals, and arrests of students. These effects are consistently over two times larger for Black students than White students. Finally, we observe that SROs increase chronic absenteeism, particularly for students with disabilities.

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