Effect of educational spending on academic performance under different institutional arrangements

Abstract

This article finds the impact of public spending on academic performance under different institutional contexts, considering a Colombian reform to the educational system as a quasi-natural experiment. The reform generated an exogenous change in each municipality¿s school spending from the Central Government and arbitrarily granted administrative decentralization to municipalities with more than one hundred thousand inhabitants. To find the causal effect of per-pupil expenditures on educational outcomes, I use the variation of per-student spending, the standardized test results for Saber11 and Saber-Pro, and the probability of entering higher education. Using an instrumental variable model, I conclude that an increase in per-student spending improves the standardized test results of secondary and higher education and the probability of entering higher education. Furthermore, through a regression discontinuity framework, I find that institutional arrangement improves the efficiency of providing education; significant heterogeneity exists among centralized and decentralized municipalities: autonomous municipalities use public resources more efficiently.