Does School Spending Pay For Itself? Long-run Effects on Personal Income

Over the past half-century, court-ordered increases in public school spending dramatically changed the level and distribution of school resources in the United States. Recent evidence from surveys suggests that school finance reforms improved students’ short- and long-run outcomes. However, the policy implications remain unclear because, although observed effects are significantly different from zero, we do not know whether the benefits exceed the costs, or whether the internal rate of return exceeds benchmark interest rates. This paper seeks to improve on past cost-benefit estimates by using population-scale longitudinal administrative tax data, which allow us to: (1) measure effects on lifecycle income, with age-specific estimates for each age from 14 to 34, each based on the outcomes for 21 birth cohorts (from 1965-2006); (2) correct for family unobservables and migration that may bias estimates upwards; and (3) correct for mis-measurement of childhood exposures that may bias estimates downwards. We build on past work using reforms to instrument for school spending, and thus provide an independent check on those crucial estimates.

Corbin Miller
Corbin Miller
Economist

Corbin Miller is an Applied Microeconomist studying topics in Public Finance, Economics of Education, Health Economics, and Labor Economics