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The strength of the relationship between student achievement and school resources has important implications for public policy in general, and for the appropriate role of state funding in local education in particular. It is well known that, to the extent that higher expenditures render improved educational performance, vexing issues of legal and economic equity arise. Of course, it is also well known that the findings of extensive empirical analysis suggest that the expenditure-achievement nexus is, at best, of secondary importance among the factors affecting education.

This paper examines the relationship between achievement and expenditure in Virginia public schools. Our focus falls in the category of education production studies which have taken an essentially macro orientation. These studies use cross-sectional and/or longitudinal observations aggregated at a school or school district level. This method thus relates average achievement by district to the level of physical and financial resources (class-size, library volumes, instructional expenditure, etc.). While the policy inferences which can flow from this approach are straightforward, there is concern whether more highly aggregated data are able to capture important details of the educational process. This is the most common explanation offered for the failure of the more highly aggregated studies in demonstrating a significant link between school resources and achievement.

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