1. McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. CHAPTER 7 EDUCATION

2. 7-2 Real Annual Expenditure Per Pupil in Public Elementary and Secondary Schools (selected years) School YearExpenditure per pupil (2004 dollars) 19804,917 1985$5,687 1990$6,746 1995$6,849 2000$7,574 2003$8,242 2004$8,248 Source: Computed from US Census Bureau, Statistical Abstract of the United States 2006. Washington, DC 2006, p. 155

3. 7-3 Justifying Government Intervention in Education  Is Education a Public Good?  Does Education Generate Positive Externalities? The Conventional Wisdom The Case Against the Conventional Wisdom The Case of Higher Education  Is the Education Market Inequitable? Commodity Egalitarianism

4. 7-4 What Can Government Intervention in Education Accomplish?  Should public education be free and compulsory?  Should government produce public education?

5. 7-5 Does Government Intervention Crowd Out Private Education? Quantity of Education Quantity of all other goods A B i e0e0 epep ii x Private School quantity of education Public schooling “crowds out” education

6. 7-6 Does Government Intervention Crowd Out Private Education? Quantity of Education Quantity of all other goods A B i e0e0 epep ii x Public schooling increases quantity of education

7. 7-7 Does Government Intervention Crowd Out Private Education? Quantity of Education Quantity of all other goods A B i e0e0 epep ii x Public schooling does not increase quantity of education

8. 7-8 Does Government Spending Improve Educational Outcomes? SOURCE: Organization for Economic Cooperation and Development [2005, Table B1.1].

9. 7-9 Does Government Spending Improve Educational Outcomes?  Comparative educational outcomes  Empirical Evidence: Does Spending on Education Improve Student Test Scores?

10. 7-10 Public Spending and the Quality of Education  Empirical Evidence: Does Reducing Class Size Improve Student Test Scores? Measuring costs Measuring benefits Project STAR Israel Timings of births Political economy analysis of class size California

11. 7-11 Does Education Increase Earnings?  Link between higher spending on education and earnings  Elementary and secondary education outcomes  Influence of age and economic status  Spending on the margin

12. 7-12 New Directions for Public Education- Charter Schools  Charter Schools- public schools operating under special state charters that permit experimentation and allow independence  Empirical evidence Diversity of choice Student outcomes

13. 7-13 New Directions for Public Education- Vouchers  Vouchers – financial grants to families that can be used to pay their children’s tuition at (nearly) any school  Argument in favor Vouchers create competition in educational marketplace  Arguments opposing Parents might not be well-enough informed to make good choices Moving children to private schools might reduce positive externalities of education If good students escape bad schools, weaker students left behind may received even worse educations Inequitable  Empirical evidence on the effect of vouchers

14. 7-14 New Directions for Public Education-School Accountability  School accountability – monitoring student and school performance via standardized tests  No Child Left Behind Act (2001)  Empirical evidence on the effectiveness of school accountability