Institutional Structure and Education Spending

Abstract

This article provides an empirical comparison of the level of education spending under three different institutional structures of spending control. From least to most centralized, these are local control of spending with overlapping Jurisdictions, local control with nonoverlapping jurisdictions, and state (or provincial) control. A model of education expenditure determination under each regime is derived and estimated (using Canadian data), and spending levels under the three regimes are simulated and compared. The results indicate that spending behavior differs significantly across regimes and that the institutional structure ofspending control is an important determinant of the level of education expenditures. The local control regime with nonoverlapping jurisdictions yields the lowest level of total education spending, but the provincial control regime has the lowest operating expenditures. The local control regime with overlapping jurisdictions has the highest level of both total and operating expenditures. These results suggest that the relationship between decen tralization and spending is not necessarily monotonic.