School expenditure and school performance: evidence from New South Wales schools using a dynamic panel analysis

This article estimates the effects of school expenditure on school performance in government secondary schools in New South Wales, Australia over the period 2006-10. It uses dynamic panel analysis to exploit time series data on individual schools that only recently has become available. We find a significant but small effect of expenditure on relative school performance and significant dynamics in the school improvement process. In addition, our estimates support previous studies in suggesting that the size of schools is an important factor in their performance. Regarding methods for analysing school expenditure effects, this article argues the relevance of a dynamic specification for the investigation of school performance and recommends a continuing research agenda using panel data and dynamic models.