The Economic Rationale for Investing in Children: A Focus on Child Care. School Resource Effects


The results from the existing large body of literature on the effects of school resources on a variety of outcomes remains highly variable, in large part due to the aforementioned difficulty of controlling for all relevant achievement inputs(6). Failure to find a systematic relationship between outcomes on the one hand and either total expenditures or specific resources on the other may result from problems with the model or data, differences by grade or student demographics in the link between outcomes and resources or inefficiency in the operations of schools and districts. Because variations in the price of teacher quality due to the existence of compensating differentials and other factors are difficult to capture, the discussion emphasizes findings on class size, teacher experience and teacher education. As these variables are the primary determinants of total expenditures on teachers and in the case of class size the main lever for school policy during the latter half of the twentieth century, evidence for these factors provides important information on the effectiveness of school resource policies.

The clearest finding, from both recent studies as well as the bulk of past research, is the lack of a systematic relationship between teacher quality as measured by student performance and the possession of a Masters degree. There is little or no evidence that an M.A. raises outcomes, and the results do not appear to be driven by the fact that schools with more difficult to educate students are more likely to hire teachers who possess an M.A. Since most school districts pay a premium to teachers with advanced degrees and some require advanced degrees in order to teach, this evidence raises serious questions about the appropriateness of such practices and more generally about the belief that education requirements necessarily improve instructional quality.

Two closely related measures of teacher quality are college quality and scores on standardized tests. There is not a consensus as to whether or not either of these variables is significantly related to student performance(7). Yet these variables explain little of the variation in teacher or school quality even in those papers that find a significant relationship.

Another important finding is that smaller classes appear to exert a significant, albeit small, effect on academic achievement. The random assignment experiment in the state of Tennessee described by Krueger (1999), the quasi-experimental study using data from Israel (Angrist and Lavy (1999)) and a study using matched panel data for the state of Texas (Rivkin, Hanushek and Kain (1998)) all produce qualitatively similar results. While the details vary somewhat, the impact of smaller classes appears to decrease with age, and it appears to be larger for economically disadvantaged students. The finding that the benefits of smaller classes are larger at lower grades suggests that benefits from smaller classes or low pupil to teacher or day care worker ratios might be substantial.

The findings for teacher experience present many similarities to those for class size in that effects appear to be larger in earlier grades and for lower income students, though the pattern is not quite as pronounced (Rivkin, Hanushek, and Kain (1998)). Importantly, the results show that only the first two years of experience have a significant impact on teacher quality as measured by student achievement gains. Teachers improve dramatically following their first year and by a somewhat smaller amount following the second year, but there is little or no evidence that additional years of experience have a significant effect on quality.

One additional finding that is relevant for early education is that special education appears to have a positive and significant effect on the achievement gains of children classified as disabled (Hanushek, Rivkin, and Kain (forthcoming)). Learning more about the effectiveness of diagnosing and treating learning disabilities and other special needs early in life should be included as part of a comprehensive evaluation of early education.