The demand for teachers by public school districts under three different market structures

David S. Pate

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: A data set consisting of pooled cross-sectional and time series data is used to examine the demand for teachers by public school districts under three separate treatments of the supply side of the markets. The data describe Maryland public school districts for the 1955-1956 through 1979-1980 school years;School districts are assumed to maximize the average educational services produced per student given their budget for current educational expenditures. An educational production function, one argument of which is the teacher-student ratio, describes the production of these educational services;The demand for teachers is first estimated under the assumption that school districts face a perfectly elastic supply curve of teachers. The demand for teachers is found to be price inelastic using the average of actual teacher salaries to capture the price of teacher services. Alternative measures of the price of teacher services constructed from published salary schedules did not perform as expected in explaining teacher demand. Similar results are obtained when the demand functions for elementary and secondary teachers are estimated separately. Previous studies have found the price of teacher services to have a positive effect on the demand for teacher experience and education levels. Here, the data allow for the construction of price variables and dependent variables which are consistent with the model. The demand for teacher experience and for teachers with bachelor's degrees responds negatively to their prices;Next, a hedonic model is used to describe the determination of the price of teacher services. When the market for teacher services is in equilibrium, teachers are allocated among school districts and prices are determined for both teacher and school district characteristics. Teacher demand and a price-characteristics function are estimated using two-stage least squares. Weak evidence of a trade-off between class sizes and teacher salaries is found among school districts which have collective bargaining agreements with teachers' unions;Finally, school districts are assumed to possess a degree of monopsony power in the market for teacher services due to the occupational and/or geographic immobility of teachers. Estimation of the supply function of teacher services is performed using two-stage least squares yielding evidence of such power among nonunionized school districts but not among unionized school districts. This evidence is not conclusive as the source of teacher immobility could not be positively identified.

Date: 1985-01-01
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