The Short-Run Production of School Outcomes and Fiscal Decentralization : Empirical Evidence from Germany

The effects of local public school spending and decentralization on school outcomes as an important measure of human capital are a subject of many international studies. We analyze the short-run effects of school expenditures from different federal levels on the rate of young people who successfully get a college entrance qualification using a regional database on Germany from 2000 to 2011. Using the local share of elderly, an election year dummy as well as a lagged expenditure variable as instrumental variables, we find positively significant impacts of the teacher density as a state input as well as of school expenditures by counties as the local input on the outcome variable. Furthermore, no significant effects of the decentralization measure are found. JEL classification: I21; I22; R50