An analysis of the cost structure of public education in the Commonwealth of Kentucky: A study of the decentralized provision of education and the efficiency of school districts

The research presented here is an analysis of Kentucky's systemic education reform initiative, the Kentucky Education Reform Act (KERA) of 1990. Data from the Kentucky Department of Education were collected and a data set consisting of all Kentucky school districts spanning the 1987–1993 time period was constructed. Variables and indices were created from these data and the data were analyzed in a cost framework. The research findings suggest evidence to support the hypothesis that the provision of education is more efficient when the production environment is less centralized.; The research attempts a complete cost analysis of a public education system based firmly on economic theory. A well specified and flexible form of the cost function for Kentucky public school districts is estimated which allows estimation without the specification of an exact input-output relationship. Using a cost-side approach, the multiproduct nature of school district production is incorporated in the model. The analysis investigates economies of scale, economies of scope, and elasticities of cost with respect to both elementary and secondary output.; The theory of bureaucratic supply motivates the presence of inefficiency in school districts given the public provision of education. Theoretical developments in the literature on frontiers and panel data are utilized to incorporate a measure of district-level inefficiency into the model. Tests on the association between the degree to which school district organization is centralized and the relative level of inefficiency among Kentucky school districts are conducted.