Do School Spending Cuts Matter? Evidence from The Great Recession

C. Kirabo Jackson (kirabo-jackson@northwestern.edu), Cora Wigger and Heyu Xiong

No 24203, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: During The Great Recession, national public-school per-pupil spending fell by roughly seven percent, and took several years to recover. The impact of such large and sustained education funding cuts is not well understood. To examine this, first, we document that the recessionary drop in spending coincided with the end of decades-long national growth in both test scores and college-going. Next, we show that this stalled educational progress was particularly pronounced in states that experienced larger recessionary budget cuts for plausibly exogenous reasons. To isolate budget cuts that were unrelated to (a) other ill-effects of the recession or (b) endogenous state policies, we use states’ historical reliance on State taxes (which are more sensitive to the business cycle) to fund public schools interacted with the timing of the recession as instruments for reductions in school spending. Cohorts exposed to these spending cuts had lower test scores and lower college-going rates. The test score impacts were larger for children in poor neighborhoods. Evidence suggests that both test scores and college-going were more adversely affected for Black and White students than Latinx students.

JEL-codes: H0 H61 I2 I20 J0 (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-edu, nep-pbe and nep-ure
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Published as C. Kirabo Jackson & Cora Wigger & Heyu Xiong, 2021. "Do School Spending Cuts Matter? Evidence from the Great Recession," American Economic Journal: Economic Policy, vol 13(2), pages 304-335.

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