Aggregation and the Estimated Effects of School Resources

Eric Hanushek, Steven Rivkin and Lori Taylor

No 5548, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper attempts to reconcile the contradictory findings in the debate over school resources and school effectiveness by highlighting the role of aggregation in the presence of omitted variables bias. While data aggregation for well-specified linear models yields unbiased parameter estimates, aggregation alters the magnitude of any omitted variables bias. In general, the theoretical impact of aggregation is ambiguous. In a very relevant special case where omitted variables relate to state differences in school policy, however, aggregation implies clear upward bias of estimated school resource effects. Analysis of High School and Beyond data provides strong evidence that aggregation inflates the coefficients on school resources. Moreover, the pattern of results is not consistent with an errors-in-variables explanation, the alternative explanation for the larger estimated impact with aggregate estimates. Since studies using aggregate data are much more likely to find positive school resource effects on achievement, these results provide further support to the view that additional expenditures alone are unlikely to improve student outcomes.

JEL-codes: H7 I2 (search for similar items in EconPapers)
Date: 1996-04
Note: LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (223)

Published as Review of Economics and Statistics, 78(4), November 1996, pp.611-627.

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Related works:
Journal Article: Aggregation and the Estimated Effects of School Resources (1996)
Working Paper: Aggregation and the Estimated Effects of School Resources (1995)
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