the role of aggregation in estimating the effects of private school competition on student achievement abstract this paper investigates possible reasons for the disparity in results in the private school competition literature in particular the focus is on the data set the grade range and level of aggregation of the competition variable and on the choice of ols or iv estimation strategies the results show that the size and significance of the competition variable depends on each of these attributes although the grade range of the competition variable has a slightly smaller impact than the others private school competition does not have a consistently positive significant effect on student achievement

the quality of schooling quantity alone is misleading although much research discusses the quantity of schooling as an effective impact on productivity and earnings most such research leaves out the idea of the quality of schooling which may cause biases in the estimated returns to schooling this paper consequently attempts to extend the standard mincerian approach to incorporate school quality as well as quantity it demonstrates how exclusion of quality in the standard procedure may cause biases in the estimated returns to years of schooling probably in the upward direction the paper explores the implications of this extension of the standard model for the case of young brazilian males it shows that the estimate of the private return to years of schooling using the preferred quality inclusive specification is only one half the estimate using the standard procedure indicating substantial upward bias in the standard estimates it further outlines a method for estimating a social return to quality and finds that it exceeds substantially the social return to quantity the paper then shows why this in turn suggests there may be an equity productivity trade off in schooling investments

do limits matter evidence on the effects of tax limitations on student performance abstract the goal of this research is to determine if limits on the revenue raising ability of school districts translate into constraints on the ability of these districts to affect student performance we use the recent imposition of property tax limitations on school districts in the chicago metropolitan area to determine if these limits have translated into slower growth in student performance we find only limited evidence that student performance in districts subject to the tax limitations has fallen relative to student performance in districts not subject to the limitations

budget constrained frontier measures of fiscal equality and efficiency in schooling equality and efficiency are key issues in educational reform here the authors analyze the efficiency and equality consequences of various school finance reforms using a cost indirect output distance function this function readily models multiple output production under conditions of budgetary constraint and provides a natural measure of performance that is closely related to farrell type measures of efficiency the analysis suggests that despite school district inefficiency finance reforms can affect student achievement however any potential gains in output from redistribution are dwarfed by the potential gains from increased efficiency more strikingly the analysis demonstrates that budgetary reforms designed to equalize expenditures could actually increase the inequality of student achievement

caveat emptor cross country data on education and the labor force abstract cross country data on education and the labor force frequently are used to describe important dimensions of development and to estimate models of economic growth and growth determinants the impact of education and related phenomena this investigation finds 1 there are serious intertemporal and inter country comparability problems with these data that may importantly affect inferences about labor force size trends and productivity and schooling investments and impact 2 data gaps are systematically related to levels of development and literacy and 3 conclusions about the determinants or consequences of development based on constructed data that have been made available to fill data gaps can be seriously misleading

school expenditures and post schooling earnings evidence from high school and beyond studies based on inputs measured at the state level generally report that school expenditures have substantial effects on students adult wages whereas studies based on less aggregated measures report small effects the author uses wage data from high school and beyond to analyze this discrepancy and to estimate the effect of school expenditures on students post schooling earnings the author finds that the discrepancy in the literature stems mostly from two factors measurement error in district level expenditures and omitted state effects in the earnings regression the author also finds that the effect of school expenditures on earnings is significant but small a 10 increase in school spending would increase students adult wages by only 0 68 copyright 1996 by mit press

an economic model of teaching effectiveness the literature on the determinants of good teaching performance has been largely devoted to empirical measurement a complete review of the publications in this area would require at least an entire issue the size of this journal yet it is virtually impossible to discover attempts to derive hypotheses about the determinants of good teaching from explicit models of behavior this has led researchers into the trap of exploring only the empirical determinants of good teaching performance typically the results of student evaluations are correlated with affective personality traits of the teachers with peer evaluations of psychological compositions or even with the results of various psychological tests examples are the works of robert isaacson et al frank costin et al and wilbert mckeachie et al in most of these studies no substantive conclusions are reached regarding the determinants of effective teaching in the few studies which do contain significant findings the independent variable in question is difficult to explain as a direct determinant of teaching effectiveness for example isaacson et al find that virtually the only statistically significant determinant of effective teaching is the personality characteristic which they label culture this may imply that simply wearing a tweed jacket and taking up pipesmoking is sufficient to improve teaching this paper takes a somewhat different approach to the analysis of teaching assume that the individual in question wishes to maximize teaching effectiveness clearly there are constraints on this maximization process one must necessarily be the time budget constraint a second constraint however adds a good deal of interest to the model this constraint is best described as the bundle of characteristics available to the individual these characteristics could be termed the components of the individual s personality such attributes include physical appearance psychological makeup speaking ability and a myriad of other variables thus this model bears a resemblance to the standard economic models of monopolistic competition see a michael spence before proceeding to a formal statement of the problem a philosophical issue must be addressed what is meant by teaching effectiveness generally this is interpreted as maximizing student evaluations of teachers however this is clearly not always equivalent to maximizing student learning unfortunately the latter variable is difficult but not impossible to measure preand posttesting with standardized tests is becoming increasingly accepted for example the meaning of teaching effectiveness in this paper must unfortunately remain ambiguous some teachers concerned perhaps with obtaining tenure will interpret good teaching as obtaining good evaluations the criterion by which they are judged others may take a more eclectic viewpoint since the problem below is an individual maximization problem the precise definition of effective teaching may simply vary from individual to individual see w r allen formally this problem is exactly analogous to one first addressed by kelvin lancaster he assumes that the consumer attempts to maximize satisfaction through purchase of bundles of attributes each commodity is possessed of certain of these characteristics by consuming various combinations of these commodities the consumer is assistant professor department of economics and director center for economic education california state university hayward i would like to thank alex cassuto nancy sanders and an anonymous referee for helpful discussion in a previously unreported experiment in the department of economics california state universitybakersfield faculty members were required to wear coats and ties in classes it was subsequently observed that teaching evaluations improved unfortunately no detailed statistical results of this experiment are available for analysis

production and innovation when techniques are tacit the case of education abstract the central theme of this paper is that the conventional economic theory of production does not hold even approximately in a field like education after examining the result of input output studies in education and the effect of government attempts to enhance education effectiveness we provide a sketch of a new production theory for sectors where techniques are poorly articulated and idiosyncratic

modeling multiple outputs in educational production functions for some time now economists have conceptualized learning as a production process most educational production functions specify only one output usually a measure of cognitive achievement some recent studies have recognized the multidimensional aspects of schooling specifying outputs in both the cognitive and affective domains introducing multiple outputs into the production function raises interesting theoretical and empirical issues one issue is the manner in which various outputs are interrelated how one models output interactions in educational production functions may be important are the outputs multiple products if so are they independently or simultaneously produced or are the outputs joint products answers to these questions may affect empirical estimates of the educational production function s this paper briefly describes how one might approach this problem we argue on conceptual grounds that modeling outputs in the cognitive and affective domains as joint products is preferable in addition we compare the three approaches empirically to evaluate the sensitivity of educational production function parameter estimates to output specification

partial fiscal decentralization reforms and educational outcomes a difference in differences analysis for spain abstract several arguments derived from fiscal federalism theory suggest that decentralization may improve the provision of public goods and services however theory remains inconclusive regarding these effects under partial decentralization the aim of this study is to examine this hypothesis by evaluating the effects on educational outcomes of the partial fiscal decentralization reform that took place in spain during the 1980s since education competences were devolved to the regions at different points in time we can consistently estimate the effects of this reform by applying the differences in differences method and by using the non decentralized regions as the comparison group we find that the reform had a sizeable impact on the percentage of students dropping out early from school the effects are much stronger for regions with a high level of revenues we also find that the effects are concentrated in the high school program and that the reform was not able to improve educational outcomes in the vocational program we interpret these results as evidence that decentralization improved the match between education policy and population preferences

comment on tax subsidized underpricing issuers and underwriters in the market for build america bonds by richard c green dario cestau and norman schurhoff

friedman s plucking model comment i introduction in a report on research in progress issued more than a quarter century ago and again in a recent article consisting largely of excerpts from the earlier report milton friedman 1969a 1993 calls into question an entire class of business cycle theories which treat boom and subsequent bust as a logical and chronological sequence he points to the austrian theory of the business cycle as an example of the class of theories at odds with his own plucking model which depicts the economy s output as falling or being plucked below trend at random intervals and to various extents in each episode of plucking the return to trend mirrors the preceding fall differing only by the underlying secular growth friedman 1993 172 indicated decades ago that if further substantiated empirically the lack of boom bust correlation would cast grave doubt on those theories that see as a source of a deep depression the excesses of the prior expansion the mises cycle theory is a clear example 1 more recently he has claimed in an interview with hammond 1992 102 that the evidence showing a zero correlation between boom and succeeding bust but a high correlation between boom and preceding bust is decisive refutation of von mises ii levels of aggregation austrians can question the decisiveness of this refutation on the basis of the different levels of aggregation employed by friedman and by mises monetarists report their findings in terms of the economy s total output which includes the output of both the investment goods sector and the consumer goods sector although investment has long been recognized by monetarists and others as being the more volatile equilibrium forces are believed generally to prevail in both sectors as the economy moves along its growth path but periods of presumably healthy economic growth are occasionally interrupted by an extramarket force namely an inept central bank that allows the money supply to contract relative to output real output is thus plucked loose from its trend during the economy s temporary departure from trend the outputs of both sectors move together first down and then up this temporal pattern of output which involves no significant relative movements of investment and consumption seems to justify the use of a single output aggregate in contrast austrians work at a lower level of aggregation in order to allow for the outputs of the two sectors to move relative to one another and even to allow for differential movements within the investment goods sector as envisioned early on by menger 1981 80 87 and developed by hayek 1967 32 68 the economy s production process is disaggregated into a number of temporally sequenced stages of production the stages can be conceived in abstract terms as second third fourth and nth order goods with the higher orders denoting stages further removed in time from the emergence of consumer goods for pedagogical concreteness the different stages can be identified with particular kinds of activities mining for instance is far removed from the consumption it will eventually make possible retailing is in close temporal proximity to consumption replacing the single investment aggregate with temporally sequenced stages that make up the economy s capital structure provides a basis for a substantive distinction between sustainable and unsustainable growth intertemporal equilibrium as maintained by the rate of interest requires a consistency between the allocation of resources among the various stages at any given point in time and the desired pattern of consumption over time if reduced interest rates reflect a change in intertemporal consumption preferences then the resulting reallocation of resources away from current consumption and toward investment and from relatively low to relatively high stages of production will eventually play itself out as a temporal shifting of consumption

schooling and economic well being the role of nonmarket effects standard estimates of the economic value of additional schooling based on earnings differences associated with differences in the level of schooling attained cover only a portion of the total effects of education that are valued by citizens we first identify a catalog of nonmarketed effects many of which have been recently studied by economists and then propose a procedure for estimating a willingness to pay value for these effects using empirical estimates of the magnitude of a selection of these effects found in the literature we calculate willingness to pay values using our proposed procedure these illustrative calculations suggest that standard estimates of the benefit of incremental schooling substantially understate the full value of such investments

schools and housing markets an examination of school segregation and performance in connecticut this paper estimates a dynamic model of price level school performance and school racial and ethnic composition in the state of connecticut the paper finds that increasing minority representation in a labor market area reinforces the existing pattern of school segregation changes in segregation appear to be influenced by demographic trends in urban areas and by the labour market factors that determine those trends there is no evidence however to suggest that this process affects housing prices rather the housing market appears to adjust relatively quickly

the public choice of educational choice the very small literature explaining i how citizens have voted in two california voucher referenda ii how legislators have voted on voucher bills in the state of florida and the us congress and iii the variation across states in charter school provisions is summarized new empirical evidence documenting the cross state variation in the success of voucher referenda and voucher bills is examined voucher bill characteristics and state characteristics play important roles voucher bills have been passed only in the more conservative republican states and almost all of the successful voucher programs have been targeted at large struggling school districts

anticipating the consequences of school reform a new use of dea we use dea type linear programming techniques to simulate a basic component of educational reform eliminating restrictions on the allocation of school personnel our technique allows us to identify potential output gains or equivalently potential cost savings from reform we can also identify which personnel groups are likely to gain and lose under this reform when we apply our model to a sample of texas school districts we find evidence that the educational establishment has substantial economic rents to protect from school reform and that the primary beneficiaries of reform are likely to be affluent school districts with few minority students the technique which relies on the relationship between the direct and indirect distance functions can be easily generalized to measure the potential gains from removing other input restrictions such as union work rules environmental regulations or deed restrictions

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

school decentralization helping the good get better but leaving the poor behind abstract the decentralization of public services is a major feature of institutional innovation the main argument in support of decentralization is that it brings decisions closer to the people thereby alleviating information asymmetries and improving accountability however decentralization can also degrade service provision in poor communities that lack the ability to voice and defend their preferences in this paper we analyze the average and distributional effects of school decentralization on educational quality in argentina we find that decentralization had an overall positive impact on student test scores the decentralization gains however did not reach the poor thus although bringing decisions closer to the people may help the good get better the already disadvantaged may not receive these benefits

public education supply and student performance this paper develops a model of public exchange whereby voters and education policy makers exchange with one another within school districts because school district consolidation lowers alternatives to voters parents consolidation is hypothesized to raise public education spending because weakened intergovernmental competition allows policy makers to promote their own utility rather than that of constituents models of public education spending and academic performance are estimated over 1988 1990 while evidence indicates little support for the traditional treatment of the leviathan hypothesis that greater competition lowers public spending this paper argues that education spending by itself does not fully provide a valid test of the leviathan hypothesis since spending by itself does not necessarily indicate the quality of public education programmes empirical evidence indicates that greater numbers of schools and school districts promote higher student achievement as evidenced by higher math and v

deep recessions fast recoveries and financial crises evidence from the american record do steep recoveries follow deep recessions does it matter if a credit crunch or banking panic accompanies the recession moreover does it matter if the recession is associated with a housing bust we look at the american historical experience in an attempt to answer these questions the answers depend on the definition of a financial crisis and on how much of the recovery is considered but in general recessions associated with financial crises are generally followed by rapid recoveries we find three exceptions to this pattern the recovery from the great contraction in the 1930s the recovery after the recession of the early 1990s and the present recovery the present recovery is strikingly more tepid than the 1990s one factor we consider that may explain some of the slowness of this recovery is the moribund nature of residential investment a variable that is usually a key predictor of recessions and recoveries

choice of ontario high schools and student sorting by ability to what extent can offering more choice in schooling lead to cream skimming or the sorting of students by ability i study whether increased choice leads to student sorting by ability into high schools in the greater toronto area on average 41 of students opt out of the high school to which they would normally be assigned based on their residence students are more likely to opt out in areas where accessibility to other schools is greatest due to population density and explicit open enrolment policies while students of higher ability are generally more likely to opt out an interaction term between school choice and ability is insignificant suggesting that increased choice does not have differential impacts by student ability findings are robust to changes in assumptions about instrument exogeneity

the influence of private school enrollment on public school performance school choice reform refers to changes that allow parents greater freedom to choose schools for their children school choice reform is contentious because it fundamentally alters the environment in which public and private schools operate and could result in significant changes for both demanders and suppliers of education this article develops a model of public education with imperfect exit to predict how private school enrollment influences performance of public schools empirical evidence from data on all private and public schools in california provides substantial support for the hypothesis that public school test scores are inversely related to private school enrollments and charter school enrollments when private and charter schooling reflects exiting by parents unhappy with local public schools implications regarding how expanded private school choice might influence public school performance in california and elsewhere are discussed

does school quality matter returns to education and the characteristics of public schools in the united states this paper estimates the effects of school quality measured by the pupil teacher ratio average term length and relative teacher pay on the rate of return to education for men born between 1920 and 1949 using earnings data from the 1980 census we find that men who were educated in states with higher quality schools have a higher return to additional years of schooling rates of return are also higher for individuals from states with better educated teachers and with a higher fraction of female teachers holding constant school quality measures however we find no evidence that parental income or education affects average state level rates of return

dollars and performance treating alcohol misuse in maine abstract if public funds are allocated efficiently then an increase in funding should improve the performance of substance abuse treatment programs in the data used in this paper performance measured as abstinence rates and expenditures per patient are not positively correlated one explanation is that funding is endogeneous i e programs treating more difficult patients receive more funding the data comes from all maine s outpatient drug free programs that received public funding between 1991 and 1994 after controlling for endogeneity this paper concludes that the marginal impact of expenditures per patient on abstinence rates is small and statistically insignificantly different from zero

the effect on black white wage differences of differences in the quantity and quality of education using data from the national longitudinal survey of youth for the years 1979 88 the author examines the extent to which black white differences in educational attainment educational quality and unmeasured individual ability can explain black white wage differences an analysis that corrects for both selectivity and ability biases inherent in estimating the education wage relationship shows that the main source of the black white wage differential is the racial difference in the quality rather than quantity of schooling in fact the author concludes closing the racial gap in the basic skills learned in school could reduce the wage differential by two thirds

intergenerational transfers production and income distribution abstract we consider an overlapping generations economy where the aggregative production process uses physical capital and human capital intergenerational transfers from parents to their children are motivated by altruism we distinguish between two types of transfers investment of parents in the education of their offspring and capital transfer the gift bequest motive we show that the intensity of each type of altruism and hence the composition of the two types of transfers affect significantly the equilibrium output and the intragenerational income distributions comparing competitive equilibria from the same initial distributions of capital transfers and human capital we derive a the economy with the higher education inclined altruism attains lower output and more equal intragenerational income distributions if either the production function s elasticity of substitution is not large or the altruism is weak b for more bequest inclined altruism the effects are usually reversed c under public provision of education higher bequest inclined altruism results in lower output and less equal distribution of income in all dates

the plucking model of business fluctuations revisited the recent surge of renewed interest in business cycles in general and real business cycles in particular brought to mind a plucking model of business fluctuations that i suggested some twenty five years ago but that has since sunk into complete oblivion 1 i was led to the model in the course of investigating the direction of influence between money and income did the common cyclical fluctuations in money and income reflect primarily the influence of money on income or of income on money one of the five kinds of evidence that i examined was the serial correlation of amplitudes of cycle phases 2 as i wrote is the magnitude of an expansion related systematically to the magnitude of the succeeding contraction does a boom tend on the average to be followed by a large contraction p 271 to find out i calculated rank difference correlations between measures of the amplitudes of expansions and successive contractions in three different series for the period 1879 to 1961 the three series were rate of change of the stock of money a physical index of general business and clearing debits as an indicator of dollar value change in general business similarly i asked the same question except starting with a contraction in the given series and correlating its amplitude with the amplitude of the succeeding expansion 3 the results were striking for all three series the correlation was trivial between the amplitude of an expansion and the amplitude of the succeeding contraction on the other hand for both the rate of change of the money stock and the physical index of general business the correlation was high and statistically significant between the amplitude of a contraction and the amplitude of the succeeding expansion for clearing debits this correlation too was low i concluded there appears to be no systematic connection between the size of an expansion and of the succeeding contraction whether size is measured by physical volume or by dollar value pp 272 73 on the other hand a large contraction in output tends to be followed on the average by a large business expansion a mild contraction by a mild expansion p 273 though that is not so for the dollar value of the expansion and contraction i went on this phenomenon if it should be confirmed by a fuller analysis of data for the united states and other countries would have important implications for the analysis of business cycles in general not solely for our monetary studies for one thing it would cast grave doubt on those theories that see as the source of a deep depression the excesses of the prior expansion the mises cycle theory is a clear example 4 for another it would raise serious questions about both the analytical models in terms of which most of us have come to approach the analysis of cycles and the statistical methods we use to analyze them our analytical models generally involve a conception of a self generating cycle in which each phase gives rise to the next and which may be kept going by a sequence of random shocks each giving rise to a series of damped perturbations the corresponding physical analogy is of an electrical network in which responses are described by sine waves the asymmetric serial correlation patter suggests that this analogy may be misleading that a better one is what can be termed a plucking model consider an elastic string stretched taut between two points on the underside of a rigid horizontal board and glued lightly to the board let the string be plucked at a number of points chosen more or less at random with a force that varies at random and then held down at the lowest point reached the result will be to produce a succession of apparent cycles in the string whose amplitudes depend on the force used in plucking the string the cycles are symmetrical about their troughs each contraction is of the same amplitude as the succeeding expansion

schools and housing values this study combines historical and quantitative methods to determine the market response to a major nineteenth century american urban architectural form the speculatively built row house the paper estimates a hedonic price index which decomposes the

price and volume effects associated with changes in the s p 500 list new evidence for the existence of price pressures attempts to identify price pressures caused by large transactions may be inconclusive if the transactions convey new information to the market this problem is addressed in an examination of prices and volume surrounding changes in the composition of the s p 500 since these changes cause some investors to adjust their holdings of the affected securities and since it is unlikely that the changes convey information about the future prospects of these securities they provide an excellent opportunity to study price pressures the results are consistent with the price pressure hypothesis immediately after an addition is announced prices increase by more than 3 percent this increase is nearly fully reversed after 2 weeks the efficient market hypothesis emh predicts that security prices reflect all publicly available information therefore one corollary of the emh is that you can sell or buy large blocks of stock at close to the market price as long as you can convince other investors that you have no private information 1 this statement assumes that securities are near perfect substitutes for each other if so the excess demand for a single security will be very elastic and the sale or purchase of a large number of shares will have no impact on price in contrast to the emh scholes 8 kraus and stoll 5 hess and frost 4 and others propose two hypotheses which predict that a large stock sale purchase will cause the price to decrease increase even if no new information is associated with the transaction the imperfect substitutes hypothesis ish also known as the distribution effect hypothesis assumes that securities are not close substitutes for each other and hence that long term demand is less than perfectly elastic under this hypothesis equilibrium prices change when demand curves shift to eliminate excess demand price reversals are not expected because the new price reflects a new equilibrium distribution of security holders the price pressure hypothesis pph assumes that investors who accommodate demand shifts must be compensated for the transaction costs and portfolio risks that they bear when they agree to immediately buy or sell securities which they otherwise would not trade these passive suppliers of liquidity are attracted by immediate price drops rises associated with large sales purchases they are compensated for their liquidity service when prices rise drop to their fullinformation levels the pph like the emh assumes that long run demand is

on the contract curve a test of alternative models of collective bargaining the traditional model of collective bargaining confines unions to settlements constrained by the employer s labor demand curve but an alternative model places wage employment outcomes on a contract curve that extends beyond the labor demand curve this paper derives a multidimensional hedonic contract curve model in which employment security provisions are used to maintain efficient bargains outside the employer s demand curve and distinguishes empirically between the contract curve and demand constraint models using data for public school teachers in new york state estimates clearly support the contract curve model over the demand constraint model by linking the gap between compensation and the value of the marginal product to the strength of employment security provisions

non public competition and public school performance evidence from west virginia abstractin this study we investigate whether non public school enrolment affects the performance of public school districts if homeschooling and private schools act as competition public school districts test scores should be positively associated with non public enrolment using data on west virginia county school districts and controlling for endogeneity with an instrumental variables approach we find that a one standard deviation increase in relative non public enrolment in a county is associated with statistically significant improvements in public school district test scores our findings thus confirm that non public enrolment and the competition it provides act to improve rather than impede public school performance