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Education finance equalization, spending, teacher quality and student outcomes: The case of Brazil ’ s FUNDEF PowerPoint Presentation
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Education finance equalization, spending, teacher quality and student outcomes: The case of Brazil ’ s FUNDEF. Nora Gordon Emiliana Vegas UC San Diego The World Bank. January 14, 2005. Structure of presentation. Motivation Background on Brazil Key features of FUNDEF

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Education finance equalization, spending, teacher quality and student outcomes: The case of Brazil’s FUNDEF

Nora Gordon Emiliana Vegas

UC San Diego The World Bank

January 14, 2005

structure of presentation
Structure of presentation
  • Motivation
  • Background on Brazil
  • Key features of FUNDEF
  • Related literature & this paper
  • Data and descriptive statistics
  • Findings
  • Conclusions & policy implications
motivation
Motivation
  • FUNDEF: an education finance reform implemented in 1998
  • Can provide useful evidence on the impact of education finance equalization strategies on access, quality, and equity of education
background on brazil
Background on Brazil
  • mid-1990s: Brazil was characterized by enormous inequality across and within states in terms of education finance, access, and quality
  • highly decentralized structure, with state and municipal education systems (26 states + DF, about 5,000 municipalities)
  • basic education (Ensino Fundamental) is comprised of 2 levels:
    • EF1 = grades 1-4
    • EF2= grades 5-8
education finance in brazil before 1998
Education finance in Brazil before 1998
  • By law, 25 percent of all state- and municipal-level taxes & transfers were mandated to be spent on education
  • States & municipalities were (anecdotally) quite creative in their definition of education spending
  • This led to enormous inequity in resources available for education within and across states (Soares 1998)
fundef key features
FUNDEF: Key features
  • Main feature is creation of a state fund to which state & municipal governments contribute 15 percent of specific taxes & transfers
  • These contributions are then redistributed to the state & municipal governments on the basis of enrollment
    • at least 60 % of FUNDEF revenues must be allocated to teacher salaries
  • The federal government supplements the per student allocation in states where FUNDEF revenues per student are below a yearly established spending floor
  • The law requires state & municipal governments to allocate 10% of FUNDEF-tapped and 25% of non-FUNDEF taxes & transfers to education
previous research on fundef
Previous research on FUNDEF
  • Found that the reform:
    • led to substantial increases in enrollment in municipal basic education systems, especially in the poorest regions (World Bank 2002)
    • associated with positive effects on repetition, dropout and age-by-grade distortion (World Bank 2002, Abrahão de Castro 1998)
previous research on education finance equalization reforms
Previous research on education finance equalization reforms
  • In the U.S., found:
    • mixed evidence about the merits on reducing inequality in student achievement (Card & Payne 2002, Clark 2003)
    • important to assess the extent to which previously allocated revenues for education are redirected to other areas (Hoxby 2001, Gordon 2004)
this paper
This paper
  • explores further how FUNDEF affected education expenditures by municipal & state governments, including the extent of crowd-out
  • examines the effect of the reform on state-level enrollment
  • analyzes how state & municipal governments allocated additional resources on inputs - teacher credentials and class size - and how these translate into student outcomes
  • evaluates the extent to which the reduction in spending inequality among states led to a decrease in inequality in student achievement
slide11
Data
  • Education indicators from INEP’s annual school census for 1996-2002:
    • student enrollment, number of teachers, teachers’ educational attainment, age-by-grade distortion
  • Annual financial data from STN (Treasury) for 1996-2002:
    • State & municipal taxes & transfers, used to calculate FUNDEF (after 1998) and non-FUNDEF resources for education
    • Expenditure data, used to calculate education expenditures
  • Student achievement data (SAEB):
    • Math and language standardized tests administered to 4th graders in 2 years prior and 2 years post FUNDEF: 1995, 1997, 1999, and 2001
    • stratified sample of students, representative at the state level for state, municipal & private schools
a short note on methodology
A short note on methodology
  • We use regular OLS, instrumental variable and reduced-form approaches to identify the effect of FUNDEF on the variables of interest
  • Our instrumental variable is the amount of education spending mandated by the reform, calculated using FUNDEF’s formula
findings
Findings
  • To what extent did FUNDEF translate into increased education expenditures by municipal & state governments, including the extent of crowd-out?
  • To what extent did FUNDEF lead to increases in state-level enrollment?
  • How did state & municipal governments allocate additional FUNDEF resources on inputs - teacher credentials and class size - and how did these translate into student outcomes?
  • To what extent did the reduction in spending inequality among states led to a decrease in inequality in student achievement?
4 effect of state level mean per pupil spending on math achievement
4. Effect of state-level mean per pupil spending on math achievement

(quantile regression results)

4 effect of state level inequality in per pupil spending on math achievement
4. Effect of state-level inequality in per pupil spending on math achievement

(quantile regression results)

conclusions
Conclusions
  • Revenue flows from FUNDEF fully translated into education spending
  • FUNDEF led to increases in enrollment in those states most affected by the reform
  • Additional resources from FUNDEF were used to reduce class size
  • Legislation mandating that teachers have at least secondary education was successful
conclusions cont
Conclusions (cont.)
  • Reductions in class size and in the share of untrained teachers are associated with slight decreases in age-by-grade distortion
  • Although changes in mean spending are not associated with higher student achievement, reductions in spending inequality may raise the achievement of students in the lower tail of the distribution