Economics of education.

• Author: Hoxby, Caroline M.
• Position: Program Report

The Economics of Education Program is both exciting and productive, currently adding new Working Papers at the rate of 7.5 per month--a 50 percent increase from the rate at the time of my last program report in fall 2006. The number of papers submitted for a typical Program Meeting is often ten times the number of available slots, and attendance at those meetings is high.

I am particularly proud of three aspects of the Program. The first is the quality of the research being produced and the methods used by members, including some of the latest, most rigorous methods in applied microeconometrics. The second is the fact that members use some of the richest, most comprehensive datasets in economics--many of these datasets were initially compiled by schools or school-related organizations, and program members deserve enormous credit for their resourcefulness in making them useful for economic research by establishing strong, collegial relationships with data providers, convincing schools to conduct randomized and other policy experiments, matching data from diverse sources, and themselves surveying or testing people when data otherwise would be missing. Third, program members produce research that is policy relevant, credible to policymakers, and grounded in economic logic.

The NBER's Higher Education Working Group was integrated into the Economics of Education Program in 2009. We made the integration an occasion to celebrate the leadership of Charles T. Clotfelter, director of that working group, who oversaw an immense improvement in the quality of research on the economics of higher education. Although the practical policy questions differ across the two levels of education, all of the methods, much of the data, and much of the deep economic logic are shared.

Areas of Continuing Interest and New Interest

In my last review, I focused on three areas in which research was advancing particularly rapidly: the analysis of peer effects; the estimation of teachers' effects on achievement; and making sense of students' college choices (not just whether to attend college in the first place, but which schools to attend and whether to persist at each school). These three areas continue to be highly productive. For instance, Elias Bruegmann and C. Kirabo Jackson (15202) demonstrate that, when a teacher whose own effect on achievement is strongly positive moves into a new school, her new colleagues improve. They further show that the colleagues' improved ability to raise achievement is attributable to their changing, not merely to selection. That is, incumbent teachers in the new school raise their performance. For another example, we now have substantial evidence on what happens to a student who goes to a school where other students are high-achieving: his own achievement rises. This evidence relies on regression discontinuity methods, that is, on comparing the later achievement of students who are just above and just below some admissions threshold, where the threshold is not known to students when they apply. Christian Pop-Eleches and Miguel Urquiola (16886) study this situation in Romania; Damon Clark ("Elite Schools and Academic Performance", presented at the spring 2007 Program Meeting) studies this situation in England; and C. Kirabo Jackson (16598) studies this situation in Trinidad and Tobago. Turning to college-going behavior, some of the most interesting new research provides rigorous evidence on how students respond to scholarships and other financial aid designed to improve their college outcomes. Aimee Chin and Chinhui Juhn (15932) show that allowing undocumented students to pay in-state tuition (usually just one-third to one-half of out-of-state tuition) has no statistically significant effect on their college attendance. Stephens Desjardins and Brian McCall ("The Impact of the Gates Millenium Scholars Program", presented at the spring 2008 Program Meeting) show that Gates Scholarships very modestly improved persistence among the low-income minority students eligible for them.

Since my last report, several new themes also have emerged in Economics of Education research. Two notable ones are the importance of information and the role of incentives for students, teachers, and schools. Because any program review is necessarily selective, I focus here mainly on illustrating these new themes.

The Importance of Information

Much of the existing research on education concerns the change in some concrete resource: a salary increase for teachers; a reduction in class size; a scholarship or other financial aid for students; the extension of compulsory schooling; or the opening of a program. Although such resource changes often can be shown to change educational outcomes, their effects typically are much smaller than proponents believed they would be. Also, two students with similar prior...