U.S. School Finance: Resources and Outcomes

Danielle Victoria Handel
Eric A. Hanushek
Published Date
In Eric A. Hanushek, Stephen Machin and Ludger Woessmann (Eds.)
Handbook of the Economics of Education, Vol. 7, Amsterdam: North Holland

The impact of school resources on student outcome was first raised in the 1960s and has been controversial since then. This issue enters into the decision making on school finance in both legislatures and the courts. The historical research found little consistent or systematic relationship of spending and achievement, but this research frequently suffers from significant concerns about the underlying estimation strategies. More recent work has re-opened the fundamental resource-achievement relationship with more compelling analyses that offer stronger identification of resource impacts. A thorough review of existing studies, however, leads to similar conclusions as the historical work: how resources are used is key to the outcomes. At the same time, the research has not been successful at identifying mechanisms underlying successful use of resources or for ascertaining when added school investments are likely to be well-used. Direct investigations of alternative input policies (capital spending, reducing class size, or salary incentives for teachers) do not provide clear support for such specific policy initiatives.