Education Program Meets

May 5, 2011
Caroline M. Hoxby of Stanford University, Organizer

Elizabeth U. Cascio and Douglas O. Staiger, Dartmouth College and NBER
Skill, Standardized Tests, and Fadeout in Educational Interventions

Educational interventions frequently have effects on test scores that fade out over time, which is generally interpreted as showing that the cognitive impacts of early intervention are short-lived. Cascio and Staiger test an alternative hypothesis: that the common practice of rescaling test scores in standard deviation units creates the illusion of fadeout. If a standard deviation in test scores in later grades translates into a larger difference in cognitive skill, then an intervention's effect on test scores may fall, even as its effect on skill remains constant or rises. The authors evaluate this hypothesis by fitting the predictions of a model of education production to correlations in standardized test scores across grades and with college-going using both administrative and survey data. Their results imply that up to 20 percent of fadeout is a statistical artifact, arising not from actual decay in cognitive skills but rather from this practice of normalization.

Aaron Sojourner, Kristine L. West, and Elton Mykerezi, University of Minnesota
When Does Teacher Incentive Pay Raise Student Achievement? Evidence from Minnesota's Q-Comp Program

Since 2005, dozens of Minnesota school districts have implemented pay for performance (P4P) plans as part of the state's Quality Compensation (Q-Comp) program. Sojourner, West, and Mykerezi perform the first systematic study of Q-Comp's impact on student achievement, exploiting variation across districts in the timing of participation and the design of districts' P4P plans to study the effects on achievement for grades 3 through 8. The results consistently show no effect on average of Q-Comp participation on either reading or math achievement. However, the effects on reading achievement depend on the design of the P4P plan. Specifically, districts offering greater rewards for teacher-centered actions or outcomes evidently experienced large gains in reading while those offering rewards based on school-wide goals or formal subjective evaluations did not. Gains from specific P4P design features were not consistently evident in math.

Ran Abramitzky, Stanford University and NBER, and Victor Lavy, Hebrew University and NBER
How Responsive is Investment in Schooling to Changes in Returns? Evidence from an Unusual Pay Reform in Israel's Kibbutzim

Abramitzky and Lavy use a novel dataset to test the prediction that the level of investment in schooling is increasing in the rate of return to education. They exploit a unique episode where different Israeli kibbutzim shifted from equal sharing to productivity-based wages in different years, resulting in sharp increases in the return to education. They use a difference-in-differences approach comparing educational outcomes of high school students in kibbutzim that reformed early (the treatment group) and late (the control group), before and after the early reforms (but before the late reforms). The treatment group is identical to the control group in observable characteristics and pre-reform mean outcomes. The authors find that students in kibbutzim that reformed early increased their investment in education, as reflected by outcomes such as whether they graduated from high school and their average matriculation scores. This effect is stronger for males, and is mainly driven by students whose parents have lower levels of education. It is also stronger for students in kibbutzim that reformed to a greater degree. The authors use various falsification tests to support the identification strategy and to show that the results are not driven by other factors, such as differential time trends or differential exit rates. Their findings support the prediction that education is highly responsive to changes in returns, especially for students from weaker backgrounds.

Brian Cadena, University of Colorado at Boulder, and Benjamin Keys, Federal Reserve Board
Human Capital and the Lifetime Costs of Impatience

Cadena and Keys examine the role of impatience in the formation of human capital, arguably the most important investment decision individuals make during their lifetime. Economic agents who are dynamically inconsistent will tend to under-invest in human capital that requires an up-front sacrifice in exchange for greater future consumption. The authors examine this hypothesis by comparing the investment decisions of impatient people to those of their more patient counterparts, the results of which reveal a substantial divergence. Using data from the NLSY and a straightforward measure of impatience, they find that people with time-inconsistent preferences systematically acquire lower levels of multiple measures of human capital including AFQT scores, educational credentials, and firm tenure. A substantial fraction of these differences arise from dynamically inconsistent behavior, such as starting an educational program but failing to complete it. As this cohort reaches middle age, the cumulative investment differences result in the impatient earning 13 percent less and expressing significantly more regret for their previous decisions.

Guido Schwerdt, Ifo Institute for Economic Research, and Martin West, Harvard University
The Road Less Traveled: Impacts of Alternative Grade Configurations through Middle and High School

Schwerdt and West use statewide administrative data from Florida to estimate the impact of attending public schools with different grade configurations on student achievement through grade 10. To identify the causal effect of school transitions, they use student fixed effects and instrument for middle and high school attendance based on the terminal grade of the school attended in grades 3 and 6, respectively. Consistent with recent evidence from other settings, they find that moving students from elementary to middle school in grades 6 or 7 causes sharp drops in student achievement. They extend this evidence by confirming that these achievement drops occur in non-urban areas and persist through grade 10, by which time most students have transitioned into high school. They also find that middle school attendance increases student absences and is associated with higher grade 10 dropout rates. Switching to high school in grade nine causes a smaller one-time drop in achievement but does not alter students' performance trajectories.

Elizabeth Cascio, Dartmouth College and NBER; Nora Gordon, Georgetown University and NBER; and Sarah Reber, University of California, Los Angeles and NBER

The War on Poverty and Educational Opportunity in the South

Title I of the 1965 Elementary and Secondary Education Act substantially increased federal aid to school districts, with the goal of improving educational opportunity for poor students. The South was a major beneficiary of the new program. Using newly collected school finance data and special Census tabulations on educational attainment, Cascio, Gordon, and Reber examine the ultimate impact of the program in the South in the years following its introduction. They use initial local child poverty rates, the primary determinant of the grant amount, to provide identifying variation while carefully controlling for other local characteristics, including racial composition and desegregation. They find that increases in federal funding over the second half of the 1960s translated into increases in educational spending of 56 cents on the dollar in the average Southern district -- because of crowding out of local revenue that is both significantly positive and less than would be predicted based on the income elasticity alone -- and raised spending nearly dollar for dollar in districts with the least scope for fiscal offset. Exploiting this differential fiscal response, they find that increases in school budgets from Title I decreased high school dropout rates for whites, but not for blacks.

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