Labor Supply, Learning Time, and the Efficiency of School Spending: Evidence From School Finance Reforms by Dr. John Klopfer
United States Naval Academy
Over the past half century, legislation in most states raised school funding. Researchers have argued that spending does not raise the quality of schooling, and hence, that money does not matter in education production. This paper provides stronger evidence that new funding did not raise school quality, but then provides new evidence that funding was used to raise the quantity of schooling by extending the school year. Thus, reforms have benefits and private costs that were not measured before. Using an event study design based on the differential timing of reforms in different states, and data from the Current Population Survey (CPS), the American Time Use Survey (ATUS), and the National Assessment of Educational Progress (NAEP), I show that: (1) schools did not use new funding to hire more or more qualified staff; (2) spending did not increase a direct measure of school quality, the rate of learning across weeks of school; (3) schools used new funding to implement a longer school year, adding weeks after NAEP testing; and (4) additional time in school crowded out students' time doing household chores, but not time with parents or other investments in human capital. My results suggest that schools spend efficiently in the narrow sense that they minimize marginal labor costs: the wage for a marginal day is half the average wage. Although additional learning time may be productive, based on the estimated rate of learning, schools do not necessarily internalize costs additional days impose on families.