The simple hypothesis that families choose their locations based upon the mix public services, amenities and taxation has enjoyed more than 60 years of economic research. The general findings of hundreds of studies is that households place value on better public services and are willing to pay a premium, in higher taxes and housing costs to get them. They vote with their feet. The only surprising result of this research is how few Americans understand the implications of this work. Nowhere better illustrates this than in the school quality and choice debate.In this column, and in the 50 or so public talks I give each year, I invariably claim that public schools are the most important element in local economic development. While it is certainly true that a well-educated population makes an economy better, I am mostly thinking about the role schools play as a local magnet for population and job growth. There’s no better way to evaluate this claim than to test the effect of school quality on enrollment. Let's see if people vote with their feet.
To do this we would logically use simple statistics to test whether school enrollment is impacted by quality measures (like the ISTEP standardized test), overall county population change, the number of competing local schools and school size. The study would have to look at the effect of school performance on later years of enrollment change. In that way, the study avoids the statistic bias caused from either the best or worst students moving. This is a simple statistical study that any junior in an economics, geography or teacher preparation program should be able to perform.
We performed this as part of a larger study, and the results of this study are stunning. Among Indiana’s almost 290 school corporations, the ISTEP pass rate is a strong predictor of school enrollment change. This is worth repeating.The single quality measure of the ISTEP pass rate is a better predictor of enrollment changes in Indiana school corporations than is overall county population change, or other factors like the number of school corporations in a county or the size of a corporation. This is worth repeating again.
School quality (as measured by the ISTEP standardized test score) matters more than countywide population decline in explaining enrollment changes in a school. Quite simply, school quality is the engine of local economic development, or lack thereof. It also drives individual school corporation enrollment.
Now, ISTEP is an imperfect measure of school quality, and we cannot know conclusively from this study whether parents are fleeing poorly performing schools or are seeking more demographically similar schools. However, when we adjust the ISTEP score for the share of students receiving free or reduced lunch (the common measure of low income households) the fundamental result stands. This implies that parents are both savvy consumers of school quality measures and not sorting based solely on socioeconomic status. Again, this study mimics most others in finding quality is the engine of local economic growth and households vote with their feet towards better-performing schools.
The implications of this simple study are clear. School quality matters, both for school enrollment and for local economic vitality. Of course there are idiosyncratic reasons for population change. Carmel schools are good, but slowly shrinking due to the demographic surge of the last two decades. Still, places with low-performing schools should prepare for economic stagnation and decline. Communities with high-performing schools should expect to ultimately thrive.
Michael J. Hicks is the director of the Center for Business and Economic Research and professor of economics in the Miller College of Business at Ball State University.