Functional Form and the Estimated Effects of School Resources

A widely-cited result in the education production function literature is that the level of measured school inputs (e.g., student–teacher ratio or starting teacher salary) is not associated with differences in student achievement, all else equal. I argue that this result may be attributable in part to the restrictive functional form assumptions used in the existing literature. I use detailed national student-level data to estimate an education production function that does not employ the restrictive assumptions of homotheticity and additivity and find statistically significant evidence that school inputs are associated with student performance. Moreover, I find evidence that traditional education production functions may understate the magnitude of the effects of school factors on student achievement. However, I find that even these larger estimated effects of measured school inputs are very small. [JEL I21] Ó 1999 Published by Elsevier Science Ltd. Al