Three essays on the economics of education in Texas

Chapter 2 examines the effect of school choice if the cost of educating students varies by ability. I construct a model where teachers allocate their time between lecturing and working with students individually. A selective magnet school is introduced and high-ability students exit the classroom, this makes educating students at non-magnets more costly. To test the effects of introducing a magnet school, I construct a six-year panel of students who during the last two years can attend a magnet program or their neighborhood school. I find that attending the magnet positively affects individual’s test scores and that the share of future magnet students in ones class negatively affects individual test scores. This suggests that some students may be better off if magnet students are removed from their class. Chapter 3 tests whether performance based incentives exist for employees of Texas schools. I construct a panel of approximately 1000 high schools in the state of Texas between 1998 and 2002 and examine the impact of performance on both salaries, and the probability of retention. The paper finds that while both coaches and principals receive some monetary incentives to perform well, in actuality, coaches are held much more accountable for their performance than principals. Chapter 4 examines how an incentive scheme for public employees based on performance measures can result in an inefficient allocation of a public good. I create a theoretical model with education being a function of verifiable and non-verifiable inputs, a fixed cost for the individual’s effort and an incentive which rewards only the output derived from the “verifiable” input. This results in lowered production as individuals chose an economically inefficient, though personally rewarding, allocation of the inputs. I test this theory by examining the Houston School District, which adopted a similar policy, and comparing its education measures to all other schools in Texas. Houston schools showed a significant improvement in only one of the measures to which incentives were tied. Overall education performance did not significantly increase, however it also did not significantly decline as was predicted in the theoretical model.