| An examination of the high school dropout rate is timely as both the federal and state governments struggle to continue their recovery from the Great Recession of 2007 – 2009 by reining in government spending. State governments are facing major revenue shortages, leading to cuts in state-funded programs including education and ameliorative social services for high school dropouts. As they assess the major cost drivers in their budgets, understanding the determinants of the high school dropout rate is crucial. Using state-year level data from the National Center on Education Statistics Common Core of Data (CCD), the U.S. Census Bureau's American Community Survey, the Urban Institute Welfare Rules Database, and the National Association of State Budget Officers Fiscal Survey, this paper uses fixed effects regression analysis to examine the nationwide relationship between inequality of total educational spending per pupil and the average high school dropout rate. The results show that, after controlling for education revenue and expenditures, income and inequality measures, race, immigration, education, and state-level fiscal stability, an increased level of inequality of educational spending (or a decrease in equality) is associated on average with a decrease in the high school dropout rate. Several alternative specifications of the original regression analysis reveal a consistent negative relationship between inequality in education spending and the dropout rate. These findings suggest that state governments must consider whether equality in education spending per pupil is a worthy policy goal in and of itself, despite a potential associated increase in the statewide dropout rate. These results should be considered cautiously by policymakers, however, because of potential for omitted variable bias throughout my estimates. |
