School Size and Returns to Education

1. School Size and Returns to Education Christopher Berry Harris School of Public Policy The University of Chicago & Martin West Department of Government Harvard University

2. A Great Transformation • From 1930 to 1970: • 115,000 school districts eliminated • 130,000 schools closed • Avg. district size increases fourteenfold • Avg. school size increases fivefold • Governance transferred from informal community institutions to large, professional bureaucracies • What were the consequences for students? • Provides important context for the current “small schools” movement

7. Number of School Districts

8. Why Might Size Matter? • Larger Schools • Pro: comprehensive curricula, specialization, attract better teachers and administrators • Con: “manning,” belonging, parental involvement, community control • Larger Districts • Pro: economies of scale, professional management, egalitarian • Con: bureaucratic, unresponsive, “too political,” stifle competition

9. What Do We Know? • Contemporary literature suggests: • Larger schools are associated with lower student performance, all else equal • But… • Existing studies are based on post-1970 data • Most studies are plagued by selection bias

10. Empirical Strategy • 1980 PUMS : Wages for 1 million workers • White men born 1920-1949, 3 cohorts • Educated 1926-1966: roughly the period of rapid consolidation • Two-Step Analysis • Estimate returns to a year of education, by state and cohort  147 estimates • Relate changes in returns across cohorts to changes in state-average school size

11. Return to Education Wage Years of Education

12. Interpretation • 100 student increase in school size  • 4-6 percent drop in earnings for H.S. grad • Standardized beta = +/- 0.8 to 1.2 • Smaller, inconsistent results for district size • No effect for state share of funding

13. Alternative Explanation? • Is school size merely a proxy for other early environmental influences? • Unlikely given contemporary opinion • Controlling for average income and share of population in rural areas does not affect our results

14. School Size and Attainment • Consolidation’s role in the mid-century growth in attainment remains unclear • Were changes in educational attainment related to trends in school size?

15. Trends in Educational Attainment

16. Attainment Results • 100 student increase in school size  • 2.5 percentage point increase in dropout rate • 2.5 percentage point decrease in college participation • No impact on college graduation • The consolidation movement appears to have slowed the pace of educational expansion

17. Methodological Issues • Selective migration • “Sheepskin effects” • Omitted variables and aggregation effects • Endogeneity • Offsetting effects on attainment or intercepts

18. Conclusions: a cautionary tale? • Conventional wisdom may be wrong • Need for rigorous evaluation • Need to explain why school size matters • Focus on Student Outcomes

19. School Size and Returns to Education Christopher Berry Harris School of Public Policy The University of Chicago & Martin West Department of Government Harvard University

20. Determinants of the Return to Education

21. Omitted Variables, Endogeneity, and Aggregation • Model isolates a state-of-birth effect • 2nd stage relates SoB effect to school and district size (incl. fixed effects) • But is size merely a proxy for other early environmental influences? • Omitted variables: e.g., family background • Aggregation bias heightens problems of omitted variables • Endogeneity: consolidation driven by state influence, unionization, urbanization

22. Family Background • Spearman Correlations

23. Population Characteristics and the Return to Education All models exclude Washington, DC

24. Selective Migration • Model identified by workers born in one state but working in another • But migration is not random, choices are based on expected earnings • Theoretically, this bias could result in over- or under-estimating quality effects • Is there a coherent migration story for both district and school size effects?

25. Discussion • Larger districts, smaller schools? • Legacy of the consolidation movement • Governance issues • Policy implications, use caution • Directions for future research

26. Consolidation in Context • Roots in late 19th century turn toward professionalization • Two dimensions of centralization 1. “Administrative progressives” • Centralizing authority in the hands of “experts” curtails city corruption and rural parochialism • Focus on businesslike efficiency and scale • “Transfer of power from laymen to professionals” 2. State governments • Initiated many consolidation proposals • Provided fiscal incentives and political pressure to consolidate • Gradually extended their authority in other areas • e.g., accreditation, curriculum, teacher certification

27. Outline • Background: Consolidation 1930-1970 • Estimation Strategy and Data • Main Results • Methodological Issues

28. Correlation Table School Characteristics, 1930-39 Cohort

29. First-Stage Model • 3 cohort-specific regressions • State of birth • State of residence • X = marital status, experience, SMSA • Years of education interacted with state of birth and region of residence • State of birth rates of return are key parameters • Model identified by those educated in one state but working in another

30. Second-Stage Model • 147 state-of-birth by cohort estimated rates of return, regressed against: • State-of-birth and cohort dummies • School characteristics, matched to state & cohort • GLS, weighted by inverse sampling variance • Assumption: family background influences level of earnings, not rate of return to education