Abstract
SummaryThe estimation of education production models used to evaluate the effect of school inputs and past skills on test scores, often called value-added models, can be biased by three main econometric issues: unobserved child characteristics, unobserved family and school characteristics and measurement error. We propose a two-step estimation technique which exploits the availability of test scores across time, subjects, families and schools in a unique administrative data set for England to correct for these potential biases. Our empirical results suggest that omitting school characteristics biases the estimation of the effect of school expenditure, whereas omitting unobserved child endowment biases the estimation of the effect of past skills but not the effect of school expenditure.
Highlights
In many countries around the world, schools are spending more money on students than ever before
In sensitivity analysis we show results of 2SLS estimates where we instrument school expenditure using predicted expenditure, which is derived by adding to the lagged expenditure the percent increase in funding per pupil set by the Minimum Funding Guarantee
We assess whether eihs,t = vihs,t +ǫihs,t is uncorrelated with the latent general cognitive ability, Yi∗h,11 by estimating the structural equation model for test scores at age 16 separately for high and low ability children at age 11.29 We find that the percentage of total variation in subject-specific test scores explained by eihs,t varies more across subjects than across level of ability, and there does not seem any pattern in the relation between the variance in measurement error and the level of ability
Summary
In many countries around the world, schools are spending more money on students than ever before. In the period 2000-2009, expenditure per student increased in each OECD country by an average of more than 36%.1. In England, expenditure per pupil has risen by 69% in real terms over the same period, from £3,060 in the year 2000 to £5,180 in 2010.2 Whether this is a worthwhile use of resources is an important question for policy and parents. The impact of additional expenditure on outcomes of students is often evaluated using value-added education production functions where child cognitive ability, measured by school test scores, is explained by current inputs and past test scores The main econometric issues with estimating such models are input omission and mis-measurement of test scores, which may bias the estimation of the effect of school expenditure on pupil outcomes, of the persistence of achievement between education stages as well as the estimation of other input effects
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