Postprint version. Published in Economics of Education Review, Volume 19, Issue 1, February 1, 2000, pages 89-106. Copyright © 2000 Elsevier. The definitive version is available at http://dx.doi.org/10.1016/S0272-7757(99)00035-7.
This paper examines school structure, spending, and performance relationships in California and finds considerable support for the public exchange model that predicts that greater competition improves student performance. The evidence indicates that, despite claims to the contrary by many advocates of public education, higher education spending does not raise student achievement. Education spending is also shown to be highest in those counties exhibiting highest monopoly power as measured by the Herfindahl index. Strong support is also shown for the public exchange view that higher market power leads to lower student achievement in the fourth and eighth grades, but little support is shown for the tenth grade.