The Differential Impact of Positive School Supply Shocks on School District Performance: Examining New School Facilities and Socioeconomic Status

Educational inequity – derived from disproportionate levels of resource availability and school quality – warrants examination from an economic perspective. The basket of topics pertinent to education policy today, may be characterized (mostly) into three categories, all representing key theoretical concepts of economics: supply, demand, and sorting. Furthermore, funding, teacher, and capital allocation patterns could inform the potential causal relationship between increased school demand (and resulting supply) and enhanced academic performance. My paper examines the district-level impact of positive school supply shocks – modeled via new school facility openings – on sorting and student performance on a standardized test. Applying econometric estimation techniques, my paper examines whether new school openings produce differential treatment effects in districts with separate socioeconomic composition. My methodology stems from previous research done by Cellini, Riegg, Ferreira, and Rothstein (2010), and Neilson and Zimmerman (2011). I also draw from Evans, Yoo, and Sipple (2010) to investigate an estimated version of student stability as a potential mechanism driving results. All 3 papers relate to school infrastructure and student performance. I find convincingly that test score improvements are relatively higher in districts experiencing a new school facility opening in FY 2009, than in districts without an opening. Additionally, I note treatment effect magnitude to be far smaller in districts exhibiting above-average income residents. In order to examine this finding further, I explore year-to-year changes in both pupil-to-teacher ratios and geographic mobility to characterize potential mechanisms behind this distinction. My results are consistent with research predecessors in that they suggest lower SES students benefit disproportionately from treatment and that test scores are decreasing in geographic mobility. Aside from previous research, I believe my finding that new school facilities most greatly improve student test performance in schools with lower pupil-to-teacher ratios, is unique and slightly inconsistent with the objective purpose of the new school facilities I examine. By using new school openings granted by the School Facilities Board of Arizona, I model a direct product of increased demand and am able to comment on how supply-side reactions impact high and low income districts differentially.