School district consolidation policies: endogenous cost inefficiency and saving reversals

Mustafa Karakaplan and Levent Kutlu

Empirical Economics, 2019, vol. 56, issue 5, No 12, 1729-1768

Abstract: Abstract Some education policy studies suggest that consolidation of public school districts saves resources. However, endogeneity in cost models would result in incorrect estimates of the effects of consolidation. We use a new stochastic frontier methodology to examine district expenditures while handling endogeneity. Using the data from California, we find that the effects of student achievement and education market concentration on expenditure per pupil are substantially larger when endogeneity is handled. Our findings are robust to concerns such as instrumental variable adequacy and spatial interactions. Our consolidation simulations indicate that failure to address endogeneity can result in unrealistic expectations of savings.

Keywords: Educational finance; Expenditures; Costs; Consolidation; Economies of scale; Efficiency; Endogeneity (search for similar items in EconPapers)
JEL-codes: H72 H75 I21 I22 I28 L38 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (19)

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DOI: 10.1007/s00181-017-1398-z

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