This paper studies how increasing teacher compensation at hard-to-staff schools can reduce structural inequality in the access to high-quality teachers. We first document dramatic inequities in schooling inputs and teacher quality to which students have access in the context of a large and diverse developing country: Peru. We then leverage a change in teacher compensation to show causal evidence that increasing salaries at less desirable public schools attracts better quality applicants and improves subsequent student test scores. We finally estimate a model of teacher preferences over local community amenities, school characteristics and wages using detailed job posting and application data from the country-wide centralized teacher assignment system. The fitted model is able to replicate the main features in the data, including the sorting patterns of teachers around the policy change in teacher wages. Model estimates indicate that while current pay bonuses in less desirable regions are helpful, the current policy is woefully insufficient to compensate teachers for the lack of school and community amenities, especially in school vacancies that are distant to the teachers’ home town or the location of their current job. Counterfactual experiments taking into account equilibrium sorting show that budget-neutral changes in the current wage schedule can achieve a remarkably more equitable distribution of teacher quality across regions.

Many argue schools that serve inner-city and rural children are in “crisis.” This paper
reviews the best available evidence on the effects of class size and school vouchers. Results from
the Tennessee STAR experiment suggest smaller class sizes improve achievement, particularly for
inner-city and minority children; results from the New York City voucher experiment and the
Milwaukee Parental Choice program suggest there may be small achievement gains in mathematics
for the African-American and Hispanic children who use vouchers. Although the reason of the
achievement gains is unknown, one candidate is the smaller class sizes in the private schools.

In this paper I review the existing evaluations of the effect of the Milwaukee Parental Choice
Program on student achievement. Two of the three existing papers report significant gains in math for the
choice students and two of the three studies report no significant effects in reading. I also extend the analysis
to compare the achievement of students in the choice schools to students in three different types of public
schools: regular attendance area schools, city-wide (or magnet) schools, and attendance area schools with
small class sizes and supplemental funding from the state of Wisconsin (“P-5” schools). The results suggest
that students in P-5 schools have similar math test score gains to those in the choice schools, and students
in the P-5 schools outperform students in the choice schools in reading. In contrast, students in the city-wide
schools score no differently than students in the regular attendance area schools in both math and reading.
Given that the pupil-teacher ratios in the P-5 and choice schools are significantly smaller than those in the
other public schools, one potential explanation for these results is that students perform well in schools with
smaller class sizes.

We present a survey of the literature on the economic returns to school quality. A
dozen studies conducted over the past 20 years show remarkably consistent estimates of the
effect of school quality on students’ subsequent earnings. A 10 percent increase in school
spending is associated with 1 to 2 percent higher annual earnings for students later in life.
We argue that the similarity of the findings across data sources and research methods suggests
that school quality has a true causal effect on student earnings. Increases in school resources
are also associated with significantly higher educational attainment, although the range of
estimates of the effect is relatively wide.

In 1990, Wisconsin became the first state in the country to provide vouchers to low income
students to attend non-sectarian private schools. In this paper, I use a variety of estimation strategies
and samples to estimate the effect of the program on math and reading scores. First, since schools
selected students randomly from among their applicants if the school was oversubscribed, I compare
the academic achievement of students who were selected to those who were not selected. Second,
I present instrumental variables estimates of the effectiveness of private schools (relative to public
schools) using the initial selection as an instrumental variable for attendance at a private school.
Finally, I used a fixed-effects strategy to compare students enrolled in the private schools to a sample
of students from the Milwaukee public schools. I find that the Milwaukee Parental Choice Program
appears to have had a positive effect on the math achievement of those who attended a private
school; but had no benefits for reading scores. I have found the results to be fairly robust to data
imputations and sample attrition, however these limitations should be kept in mind when
interpreting the results.