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Education Spending and State Economic Growth: Are All Dollars Created Equal?

¹ Creighton University, Omaha, NE, USA
² Salisbury University, Salisbury, MD, USA
³ Winthrop University, Rock Hill, SC, USA

^* To whom correspondence should be addressed. E-mail: johndeskins{at}creighton.edu.

	Abstract

This article contributes to the literature on the effect of state and local education spending on U.S. state economic growth by separately analyzing higher and K-12 education spending and by taking into account the possibility that education spending may generate spillover effects to neighboring states. Results from a series of fixed-effects regressions using a 1992-2002 panel of state-level data indicate that increased spending on higher education generally exhibits a relatively large negative effect on private sector employment or gross state product growth when the increase in education spending is financed through own-source revenue. Results do not identify a statistically significant relationship between K-12 education spending and economic growth. This finding is an important clarification in the literature because an analysis of combined higher and K-12 education spending yields an overall negative effect. Results do not provide consistent evidence of cross-state spillover effects associated with either form of education spending.

First published on October 14, 2009
Economic Development Quarterly 2009, doi:10.1177/0891242409347370


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