Working Paper: NBER ID: w28255
Authors: Patrick Bayer; Peter Q. Blair; Kenneth Whaley
Abstract: Expenditures on teacher salaries in US public schools exceeds $200 billion annually, yet there is no existing evidence on whether this spending level is efficient. We fill this gap by developing a theoretical test for efficiency based on the causal impact of salary spending and taxes on local house prices. We empirically implement the test on a national sample of school districts from 1990-2015, using a research design that generates quasi-random variation in public school spending and taxes. We find that a tax-funded increase in salary spending would raise house prices, indicating that spending on teacher salaries is inefficiently low.
Keywords: teacher salaries; public education; school spending; house prices
JEL Codes: H41; I22; I24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in tax-funded salary spending (H59) | increase in house prices (R31) |
| increase in salary spending (H59) | house prices rise (R31) |
| increase in local property tax revenue (H71) | decrease in house prices (R31) |
| salary spending is inefficiently low (J31) | house prices rise in response to increased salary spending (R31) |