Spatial Variations in Cost Efficiency, Optimal Size, and Output Quality of School Districts: Evidence from Georgia

The purpose of this paper is to expand traditional research concerning the educational cost function by (1) investigating how the size structure of school districts affects output quality and cost efficiency and (2) exploring spatial variations in cost efficiency and optimal size for school districts. Three socioeconomic regions are defined in Georgia: the Metropolitan region, which consists of all metropolitan counties; the Highland region north of a line from Talbot to Warren counties; and the Coastal Plain region, which consists of rural counties south of this line. The study found that economies of scale as a general phenomenon exist in all school district operations and in all three socioeconomic regions. School districts generally are larger than the optimal size. Optimal size varies by these socioeconomic regions. The Metropolitan region has a larger optimal size than do the Highland and Coastal Plain regions, and also has higher overall cost efficiency. However, the Coastal Plain region and, to a lesser extent, the Highland region have advantages in the realm of quality improvement. These findings provide a basis for cost savings, quality improvement, and reducing regional quality gaps through school district reorganization, functional reorganization, and fund reallocation.