Twice as Nice: An Analysis of School District Efficiency with Two Measures of Student Performance

Abstract: This study examines the components of efficiency measures used in studies of educational cost. We enrich the literature by developing a model that uses two indexes of student performance. This model is used to reveal how scholars ’ choice among student performance measures affects the measurement of efficiency. We show that the inefficiency measured in educational cost studies includes spending related to student performance measures not included in the analyses. Our simulation shows that more of the resulting increase in spending associated with a $1000 increase in state aid can be explained by spending on other included student performance measures than by an increase in inefficiency, which measures both wasteful spending and spending on other outputs not included in the study. These results suggest that efforts to minimize measures of inefficiency may incentivize districts to dissolve programs valued by voters because spending for these programs is implicitly considered inefficient. This finding has widespread implications for education policy, especially in the development of accountability systems.