Using Market Valuation to Assess the Importance and Efficiency of Public School Spending

In this paper we take a "market-based" approach to examine whether increased expenditures improve perceived school quality and whether the current level of public school provision is inefficient. We find evidence that, on average, school districts are not wasting taxpayers' education dollars. Rather, if anything, we find that education may be underfunded. As a result, increased competition has the potential to increase school spending levels. We also find evidence that school districts spend less efficiently in areas in which school districts face less competition from other public schools and in areas in which residents are less educated (leading either to less mobility from a lack of resources or to less efficient education production through peer effects).