McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

CHAPTER 7

EDUCATIONEDUCATION

7-2

Real Annual Expenditure Per Pupil in Public Elementary and Secondary Schools (selected years)

School Year Expenditure per pupil (2004 dollars)

1980 4,9171985 $5,6871990 $6,7461995 $6,8492000 $7,5742003 $8,2422004 $8,248

Source: Computed from US Census Bureau, Statistical Abstract of the United States 2006. Washington, DC 2006, p. 155

7-3

Justifying Government Intervention in Education

Is Education a Public Good? Does Education Generate Positive

Externalities? The Conventional Wisdom The Case Against the Conventional Wisdom The Case of Higher Education

Is the Education Market Inequitable? Commodity Egalitarianism

7-4

What Can Government Intervention in Education Accomplish?

Should public education be free and compulsory?

Should government produce public education?

7-5

Does Government Intervention Crowd Out Private Education?

Quantity of Education

Qua

ntity

of

all o

ther

goo

ds

A

B

i

e0ep

ii

x

Private School quantity of education

Public schooling “crowds out”

education

7-6

Does Government Intervention Crowd Out Private Education?

Quantity of Education

Qua

ntity

of

all o

ther

goo

ds

A

B

i

e0 ep

ii

x

Public schooling increases quantity of education

7-7

Does Government Intervention Crowd Out Private Education?

Quantity of Education

Qua

ntity

of

all o

ther

goo

ds

A

B

i

e0ep

ii

x

Public schooling does not increase

quantity of education

7-8

Does Government Spending Improve Educational Outcomes?

Figure 7.2: Real annual expenditures on public and private schools per student,all levels of education, selected countries (2002)

0

2,000

4,000

6,000

8,000

10,000

12,000

Switzer

land

United

Stat

es

Norway

Denm

ark

Austri

a

Sweden

Belgium

Italy

Icela

nd

Franc

e

Japan

Finlan

d

Nether

lands

Austra

lia

German

y

United

King

dom

Portuga

l

Spain

Irelan

d

Korea

Greec

e

Hunga

ry

Czech

Rep

ublic

Poland

Slova

k Rep

ublic

Mex

ico

Exp

endi

ture

per

stu

dent

(U

S do

llar

s)

SOURCE: Organization for Economic Cooperation and Development [2005, Table B1.1].

7-9

Does Government Spending Improve Educational Outcomes?

Comparative educational outcomes Empirical Evidence: Does Spending on

Education Improve Student Test Scores?

7-10

Public Spending and the Quality of Education

Empirical Evidence: Does Reducing Class Size Improve Student Test Scores? Measuring costs Measuring benefits Project STAR Israel Timings of births Political economy analysis of class size California

7-11

Does Education Increase Earnings?

Link between higher spending on education and earnings

Elementary and secondary education outcomes

Influence of age and economic status Spending on the margin

7-12

New Directions for Public Education-Charter Schools

Charter Schools- public schools operating under special state charters that permit experimentation and allow independence

Empirical evidence Diversity of choice Student outcomes

7-13

New Directions for Public Education-Vouchers

Vouchers – financial grants to families that can be used to pay their children’s tuition at (nearly) any school

Argument in favor Vouchers create competition in educational marketplace

Arguments opposing 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

7-14

New Directions for Public Education-School Accountability

School accountability – monitoring student and school performance via standardized tests

No Child Left Behind Act (2001) Empirical evidence on the effectiveness of

school accountability