Location Effects and the Determination of Beginning Teacher Salaries: Evidence from Ohio

This paper provides a new treatment of district location in modeling the determinants of teacher salaries by incorporating the methodology of spatial econometrics. Using a location weighting variable, we examine how starting teacher salaries in one district are influenced by other districts' starting salaries in the region. We find that a $1 increase in average beginning teacher salaries of a district's neighbors generates an own salary increase in average teacher salaries ranging from $0.51 to $0.96. In order to completely account for the spillover effects present, the specification of the location variable must incorporate both the size and distance of neighboring districts.