Relationship between types of school district expenditures and student performance

Abstract

An educational production function is estimated using achievement test scores to proxy school output, with socio-economic characteristics and expenditures in various categories as inputs. The data are school district level expenditures. Unlike most past research, a correction is made for the heteroscedasticity created by differences in school district size. Correcting for heteroscedasticity leads to statistical tests with greater power. Test scores were positively related to expenditures on instruction and instructional support, and are negatively related to expenditures on student support, such as counselling and school administration. The negative effect of counselling and administration could be due to counsellors taking up classroom time or administrators using classroom time with announcements or assemblies. Alternatively, the causality could go the other way. It could be that schools with problems hire more administrators and counsellors. The socioeconomic variables included may not fully capture the problems that a school faces. The results show that spending is useful when targeted towards instruction. The effect, although statistically significant, is not large. But, the research still finds that money matters if it is spent on instruction.