During the Great Recession, national public school per-pupil spending fell by roughly 7 percent and persisted beyond the recovery. The impact of such large and sustained education funding cuts
is not well understood. To examine this, first, we document that the recessionary drop in spending coincided with the end of decades-long national growth in both test scores and college-going.
Next, we show that this stalled educational progress was particularly pronounced in states that experienced larger recessionary budget cuts for plausibly exogenous reasons. To isolate budget cuts
that were unrelated to (i) other ill-effects of the recession or (ii) endogenous state policies, we use states' historical reliance on state-appropriated funds (which are more sensitive to the business
cycle) to fund public schools interacted with the timing of the recession as instruments for reductions in school spending. Cohorts exposed to these spending cuts had lower test scores and lower
college-going rates. The spending cuts led to larger test score gaps by income and race.
Jackson, C. Kirabo, Cora Wigger, and Heyu Xiong.
"Do School Spending Cuts Matter? Evidence from the Great Recession."
American Economic Journal: Economic Policy,
Business Fluctuations; Cycles
National Government Expenditures and Education
State and Local Government: Health; Education; Welfare; Public Pensions
Analysis of Education
Education: Government Policy
Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination