The Demand for Education and the Production of Local Public Goods

David Mayston (davidmays011@alumni.york.ac.uk)

Discussion Papers from Department of Economics, University of York

Abstract: Improving the educational outcomes which schools achieve in the primary and secondary education sectors has become a central public policy goal, to which large sums of public money have been devoted. Being able to estimate the educational production function between pupil educational achievements, resource inputs and characteristics of the pupil intake in an unbiased way can help progress both ex ante policy formation and ex post effectiveness monitoring. Such an unbiased estimation requires recognition of not only the supply-side concept of the educational production function but also several demand-side relationships affecting the demand for school places, the socio-economic characteristics of a school’s pupil intake, the quality of teaching staff a school can recruit, and the determination of local property prices. Failure to recognise these additional inter-relationships through the use of standard single-equation Ordinary Least Squares multivariate regression will result in multiple sources of cumulative downward bias in the estimated importance of resource variables in influencing pupil educational outcomes, in ways which are analysed in this paper. The analysis of this paper calls into question the conclusions drawn by Hanushek and others, from many of the earlier statistical studies of the educational production function, of there existing no substantial link between educational resourcing and educational outcomes.

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