Elementary School Funding
Introduction
Baron et al. (2024) examine the effect of increased elementary school funding on long-run crime rates. The paper leverages variation in public elementary school operational expenditures as a result of Michigan’s 1994 school finance reform. This reform centralized school funding at the state-level, reducing inequities in per-student expenditures across districts. As funding was substantially increased for low-income districts while remaining stable for high-income districts, the paper employs a difference-in-differences approach to estimate the causal impact of school funding. To measure the impact on crime, arrest data is obtained from the Michigan State Police covering the universe of arrests from January 2012 to May 2020. The arrest data was linked to six cohorts of Michigan public, non-charter elementary school students from 1995 to 2000, totaling over 700,000 students in 518 school districts.
MVPF = 1.2
Net Cost
The net cost includes both the direct cost of additional school funding as well as the government cost savings from less criminal activity. All costs are reported in 2012 dollars.
The direct cost from a 10% increase in school funding can be broken down into the cost for grades K-3 and 4-12. The average K-3 per-pupil spending in the sample is $9,879. Taking 10% of this cost over four years (0.10 x 9,897 x 4) results in a K-3 direct cost of $3,952. While the analysis focuses on grades K-3, there are some students from earlier cohorts exposed to additional spending past grade 3. The paper reports that a 10% increase in spending in K-3 leads to a 1.7% increase in spending in grades 4-12. Incorporating this additional cost using a 4% discount rate leads to a total direct cost of $5,140.
The reduction in crime leads to lower police, court, and incarceration costs. The paper estimates that being exposed to a 10% increase in school funding leads to a 2 percentage point (15%) decline in the chance of being arrested as an adult. For the cost savings associated with this reduction criminal activity, the paper uses estimates from Heckman et al (2010). Applying a discount rate of 4%, the cost savings are $840.
The net cost is then $5,140 – $840 = $4,300.
Willingness to Pay
The willingness to pay for the additional school funding is quantified by the social benefit from the reduction in crime. Specifically, for each person in the sample, the paper multiplies the social cost of each crime type by the number of arrests of that type. The aggregated total cost becomes the dependent variable in the difference-in-difference regression. The paper uses estimates of the social cost of each crime type from Chalfin (2015). The paper discounts the social benefit of crime reduction back to age 7.5 – the average age in K-3. Using a 4% discount rate, the willingness to pay for a 10% increase in school funding is $5,036.
MVPF Summary
The MVPF for the increased elementary school funding is then $5,036/$4,300 = 1.2.
The paper presents MVPFs under varying discount rates (3%-5%) and an alternative set of social cost of crime estimates from McCollister et al. (2010). The MVPFs reported in the paper range from 1.0 – 2.1.
References
Baron, E. Jason, Joshua Hyman, and Brittany Vasquez (2024). “Public School Funding, School Quality, and Adult Crime.” Forthcoming in The Review of Economics and Statistics. https://direct.mit.edu/rest/article/doi/10.1162/rest_a_01452/120877/Public-School-Funding-School-Quality-and-Adult
Chalfin, Aaron (2015). “Economic costs of crime.” The Encyclopedia of Crime and Punishment, 1-12. https://onlinelibrary.wiley.com/doi/full/10.1002/9781118519639.wbecpx193
Heckman, James, Seong Hyeok Moon, Rodrigo Pinto, Peter Savelyev, and Adam Yavitz (2010). “The Rate of Return to the HighScope Perry Preschool Program.” Journal of Public Economics, 94(1): 114-128. https://www.sciencedirect.com/science/article/pii/S0047272709001418
McCollister, Kathryn E, Michael T French, and Hai Fang (2010). “The cost of crime to society: New crime-specific estimates for policy and program evaluation.” Drug and Alcohol Dependence, 108(1-2): 98-109. https://pmc.ncbi.nlm.nih.gov/articles/PMC2835847/
Policy Features
- Category
- Education
- Sub-Category
- Child Education
- Beneficiary Type(s)
- Children and Youth, Students
- Average Age
- 7.5
- Country of Implementation
- United States
- Year of Implementation
- 1994
- Empirical Method
- Difference in Differences
- Research Type
- Primary
- Peer Reviewed
- Yes