The Wyoming Hedonic Wage Index, Teacher Salaries, and Competition: An examination of the Wyoming Hedonic Wage Index and Teacher Labor Markets in Wyoming

This paper sets out to answer three questions: (1) Can the specified model used to estimate the Wyoming Hedonic Wage Index (HWI) be improved upon, (2) Is between effects the optimal way to estimate the HWI, and (3) Are the labor markets for teachers in Wyoming competitive? Each school district in Wyoming is guaranteed a particular level of funding by the state. The funding is adjusted for labor (teacher) cost variations found between districts. The HWI is one method used for adjusting these regional costs. The district guarantee must be correctly adjusted for differences in labor costs; otherwise a district may be unable to adequately staff its schools. Our empirical analysis of the HWI and Wyoming teacher labor markets uses an unbalanced panel of data obtained from Godby (2010), consisting of 20,233 observations on 8,039 teachers over the period 2006-07 to 2008-09. Contrary to previous research, we find that the HWI should be estimated using fixed effects, rather than between effects (Baker, 2005) or AR (1) random effects (Taylor, 2011). The results from our labor market analysis were inconclusive. We do find evidence however, that the implementation of the HWI as a regional cost adjustment has helped to mitigate unequal funding between school districts in Wyoming.