Measuring the Education Function of Government in the United States Michael S. Christian U.S. Bureau of Economic Analysis

2 Input and Volume Approaches  Public education currently measured in United States using input approach  Value of output equals cost of inputs  Assumes productivity is constant and zero  Direct volume measurement allows for changes in productivity

3 Elementary and Secondary  Most straightforward volume measure is simple count of students  Grew at annual 0.7% rate  Input measure grew 2.4%  Assumes all students are equal outputs  Assumes quality of education is constant

4 Special Education  Growth in special education  9.4% of students in 1980, 12.1% in 2001  Chambers et al (2004): special-ed students twice as expensive  Count special-ed students double  Increases growth rate from 0.73% to 0.85%

5 School Quality  Improvement in school quality  Student outcomes (test scores)  Quality of school inputs

6 Test Scores  Test scores  12 th grade math scores improved by about one third standard deviation over  How should we use this to adjust volume?  What is the rate of substitution between years of education and cognitive skill?

7 Test Scores to Years of Education  Use effect of education on test scores  Takes 3.3 years for average NAEP scores to rise 1 cross-sectional deviation  1 standard deviation = 3.3 years education  1/3 s.d. increase in 12 th grade scores: 12 years in 1999 = 13.1 years in 1982  Upper-bound adjustment

8 Adjusting With Test Scores  Test scores adjustment increases growth from 0.85% to 1.22%  Adjusting for raw scores assumes all improvements are caused by schools  Holding parents’ education constant reduces adjusted growth rate to 1.00%

9 School Inputs  Quality of school inputs  Pupil-teacher ratio fell from 18.7 in 1980 to 15.9 in 2001  Inexperienced (0-1 years) teachers rose from 5.3% in 1980 to 8.8% in 2000  How do these changes affect the quality of education?

10 School Inputs to Years of Education  Huge academic literature measures effects of school inputs on test scores  Multiply effects by substitution rate between test scores and years of education to make quality adjustment

11 Adjusting with School Inputs  Literature on school inputs  Teacher experience important  Class size controversial  Not much evidence for others  Adjusting for class size, experience increases growth 0.85% to 1.06%

12 Summary of Adjustments Annual volume growth, Direct volume measures Count of students0.73% School inputs and special ed1.06% Test scores and special ed1.22% Input measure2.41%

13 Elementary/Secondary Measures

14 All Levels of Education (1)  Total education volume measure  Volume measures for all of elementary/ secondary, instruction part of higher  Input measures for rest of higher, “other”  Combined using Fisher index  Result is 90/10 volume/input hybrid index

15 All Levels of Education (2) Annual volume growth, Slowest volume measure1.08% Fastest volume measure1.45% Input measure2.47%

16 All Levels of Education (3)