CHAPTER 7 EDUCATION Mc GrawHillIrwin Copyright 2008 by

Real Annual Expenditure Per Pupil in Public Elementary and Secondary Schools (selected years) School Year 1980 1985 1990 1995 2000 2003 2004 Expenditure per pupil (2004 dollars) 4, 917 $5, 687 $6, 746 $6, 849 $7, 574 $8, 242 $8, 248 Source: Computed from US Census Bureau, Statistical Abstract of the United States 2006. Washington, DC 2006, p. 155 7 -2

Justifying Government Intervention in Education o o Is Education a Public Good? Does Education Generate Positive Externalities? n n n o The Conventional Wisdom The Case Against the Conventional Wisdom The Case of Higher Education Is the Education Market Inequitable? n Commodity Egalitarianism 7 -3

What Can Government Intervention in Education Accomplish? o Should public education be free and compulsory? o Should government produce public education? 7 -4

Quantity of all other goods Does Government Intervention Crowd Out Private Education? A x ii Public Private schooling School i “crowds quantityout” of education B ep e 0 Quantity of Education 7 -5

Quantity of all other goods Does Government Intervention Crowd Out Private Education? A x ii i Public schooling increases quantity of education B e 0 ep Quantity of Education 7 -6

Quantity of all other goods Does Government Intervention Crowd Out Private Education? A x Public schooling does not increase quantity of education ii i B ep e 0 Quantity of Education 7 -7

Does Government Spending Improve Educational Outcomes? SOURCE: Organization for Economic Cooperation and Development [2005, Table B 1. 1]. 7 -8

Does Government Spending Improve Educational Outcomes? o Comparative educational outcomes o Empirical Evidence: Does Spending on Education Improve Student Test Scores? 7 -9

Public Spending and the Quality of Education o Empirical Evidence: Does Reducing Class Size Improve Student Test Scores? n Measuring costs n Measuring benefits n Project STAR n Israel n Timings of births n Political economy analysis of class size n California 7 -10

Does Education Increase Earnings? o Link between higher spending on education and earnings o Elementary and secondary education outcomes o Influence of age and economic status o Spending on the margin 7 -11

New Directions for Public Education. Charter Schools o Charter Schools- public schools operating under special state charters that permit experimentation and allow independence o Empirical evidence n Diversity of choice n Student outcomes 7 -12

New Directions for Public Education. Vouchers o o Vouchers – financial grants to families that can be used to pay their children’s tuition at (nearly) any school Argument in favor n o Arguments opposing n n o Vouchers create competition in educational marketplace Parents might not be well-enough informed to make good choices Moving children to private schools might reduce positive externalities of education If good students escape bad schools, weaker students left behind may received even worse educations Inequitable Empirical evidence on the effect of vouchers 7 -13

New Directions for Public Education-School Accountability o School accountability – monitoring student and school performance via standardized tests o No Child Left Behind Act (2001) o Empirical evidence on the effectiveness of school accountability 7 -14