Estimating the Spillover Effects of School District Demographics on Per-Pupil Spending

The level of education spending may not only be determined by a school district’s characteristics, but also by the characteristics of neighboring school districts. To properly evaluate these impacts, I use the approach which develops summary impact measures for inference on statistical significance. This article is the first in the education finance literature to explicitly measure the spillover effects of school district demographics with respect to per-pupil spending. Many studies have estimated fiscal competition models with respect to public expenditures, but competition among the determinants may exist as well. The explicit estimation of these spillover effects can improve our understanding of how changing demographics will impact state and local government finance. Policymakers need to be aware of shifts not just because of what the implications are for their school district, but how the changes in neighboring districts may impact their district, too.