More Money, Better Students? - Evidence from a Funding Reform of Danish High Schools

Abstract:

This paper investigates the effect of funding in Danish high schools on the educational outcomes of students. To address endogeneity we exploit the standardization of government subsidies in 2008 that lead to rapid convergence in funding pr. student. At the high-school level, more funding lead to more teacher working hours pr. student, but did not increase average teacher wages. We find no signicant effects of reform-induced funding changes on a wide range of student outcomes including completion, exam grades and the propensity to continue education. Our IV-strategy yields relatively precise estimates of the effects on student outcomes indicating that our results are not caused by large statistical uncertainty.