Salaries in Space

Abstract

This article, drawing on a rich panel of administrative data comprising all public school teachers employed in Kentucky from 1997 to 2005, utilizes methods developed in spatial econometrics to test for spatial interdependence in the teacher remuneration policies utilized by public school districts. The results of the best fitting model suggest that a 1 percentage point increase in the salary generosity of a particular district’s distance-weighted neighbors yields a 0.57 percentage point increase in the generosity of salaries within that district, even after controlling for relevant district characteristics and including time and district fixed effects. The results are discussed within the context of state education finance reforms, the school choice movement as well as the continued national focus on improving teacher quality as a primary mechanism to increase student achievement.