Improving America's schools: Determinants of student performance

Date of Completion

January 2002


Education, Finance|Education, Administration




This research focuses on: (1) school funding effectiveness; (2) teacher effort/incentive structures and; (3) racial and international achievement gaps and existing improvement remedies including my proposed franchising structure. In the first essay I extend previous conflicting findings of school funding effectiveness (i.e. positive or negative affect on student performance) by endogenizing school funding through the use of a political economy model. The endogeneity of school funding is at the local government level and is characterized by two pressure groups with conflicting support functions. The objective of the local government is to maximize a weighted support function subject to the government's income constraint. Once school expenditures are determined, it enters into the standard ‘knowledge’ production function. Thus, the empirical model is a joint estimation of expenditures and production. The second essay supports recent findings that teacher effort is critical in the establishment of high student performance levels by applying the principal-agent theory to the issue of teacher effort and incentives. The essential element in this analysis is that school districts cannot infer teacher effort from output because of a random variable (e.g. student quality) that impacts student performance. Thus, the school district's problem is to choose a wage structure and induce an optimal level of effort from the teacher that maximizes the school district's objective function (i.e. increased testing performance minus teacher wage) subject to the teacher's participation and incentive compatibility constraint. The third essay uncovers the racial and international performance gaps that exist in the nation's elementary and secondary institutions. This essay reviews the traditional structure of the U.S. educational system and existing improvement initiatives such as magnet schools, charter schools and school vouchers. Finally, I propose franchising as a viable structure for elementary and secondary education. Under a franchising framework, the federal department of education would serve as the franchiser and current public, charter, magnet, and private schools will be franchisees. This structure would standardize core curriculum areas (i.e. English, Mathematics, Science and History) and allow for autonomy on the part of local governments to tailor their curriculum to meet the specific needs of their locality. ^