Chapter 9: The Relationship Between Student Performance and School Expenditures: A Review of the Literature and New Evidence Using Better Data

What can we conclude from the past 30 years' research about the relationship between student performance and school expenditures? This chapter begins with an overview of primary studies of “education production function.” It then explains why the major syntheses of these studies reach opposing conclusions, with Hanushek finding “no strong or systematic relationship” and Hedges, Laine, and Greenwald finding sizable, positive effects. Finally, this chapter presents new research that takes advantage of superior new data. Results from three analyses using these data indicate that school expenditures have a positive, statistically significant effect on student achievement, but the effect is substantively small.