Michael Lovenheim; Sarah Turner

• Opening Stories: provide a paradigm of economics concepts in the form of an intriguing story or critical question.
• Toolbox: provides in-depth explanations on technical tools for students with limited exposure to economics.
• Deep Dive: provides in-depth analysis of specific research articles.

I. Introduction and Background

Chapter 1 Why do Economists Study Education Policy?
Opening Story The US Educational Attainment Gap
1.1 Defining the Economics of Education
What is Education?
What is Economics?
1.2 Studying the Economics of Education
Scientific Method and the Economics of Education
Questions for the Economics of Education
Markets in Education
1.3 What Can Economics Teach Us About Education Policies?
The Different Types of Education Policies
Policies as a Set of Incentives
1.4 The Road Ahead: Objectives and Organization of the Book
1.5 Conclusion
Highlights
Problems

Chapter 2 The Structure and History of Education Markets in the US
Opening Story The Education of Benjamin Franklin
2.1 Defining Education Markets
The Levels of Education in the United States
DEEP DIVE: International Schooling Comparisons
Providers in Education Markets
Arguments for the Role of Government and Nonprofits in Education
2.2 The Roles of Government in Education
Regulations and Mandates in Education
Public Funding for Education
2.3 Development of Education Institutions and Attainment in the United States
Mid-19th Century: The Common School Movement
1910-1940: The High School Movement
1940-1975: Expansion at the Postsecondary Level
1975-Today: The Growth in Demand for Skill and the Shift to Market-Based Schooling Policies
2.4 Conclusion
Highlights
Problems

Chapter 3 Empirical Tools of Education Economics
Opening Story Why Does College Enrollment Differ by Family Income?
3.1 Descriptive Evidence and the Distinction between Correlation and Causation
DEEP DIVE: Why is it Important to Distinguish Correlation from Causation?
3.2 Randomized Control Trials: The Experimental Ideal
3.3 Nonexperimental Methods
Regression Analysis
Policy Changes and Difference-in-Difference Estimates
Instrumental Variables
Regression Discontinuity: Examining Sharp Breaks
3.4 Conclusion
Highlights
Problems

II. The Foundations of Education Production and Investment
Chapter 4 The Human Capital Model
Opening Story The Education Investment Decisions of Morgan and Stanley
4.1 What is Human Capital?
4.2 The Costs and Benefits of an Education
4.3 Basic Setup of the Human Capital Model
4.4 Present Value Formulation and Educational Investments
4.5 Predictions from the Investment Model of Education
Changes in Direct Costs
Changes in Indirect Costs
Changes in Benefits
4.6 Continuous Schooling Choices
4.7 Why Does Educational Attainment Differ Among Individuals?
People Differ in Their Ability to Finance Direct Costs
People Differ in the Benefits They Receive from Education
Policy Implications of Differences in Attainment
4.8 Conclusions and Questions for Empirical Work
Highlights
Problems

Chapter 5 The Signaling Model: An Alternative to the Human Capital Framework
Opening Story How Would You Hire the Best Workers?
5.1 The Motivation for the Signaling Model
5.2 Setup of the Signaling Model
5.3 Signaling Model Equilibrium
Separating Equilibrium
Pooling Equilibrium
5.4 Signals and Indices
5.5 The Importance of Distinguishing Between the Human Capital and Signaling Models
The Private and Social Returns to Education
5.6 Empirical Evidence on Signaling Models
Distinguishing Between Human Capital and Signaling Models
Empirical Evidence
DEEP DIVE: Estimating the Labor Market Signaling Value of a GED
DEEP DIVE: Estimating the Labor Market Signaling Value of a High School Diploma
DEEP DIVE: Sheepskin Effects in the Returns to Education
5.7 Conclusion
Highlights
Problems

Chapter 6 The Returns to Education Investment
Opening Story Is Investing in Education "Worth It?"
6.1 The Difficulty of Estimating the Causal Effect of Education on Earnings
Selection When Ability is One-Dimensional
Selection When Ability is Multi-Dimensional
6.2 Empirical Evidence on the Returns to Educational Attainment
The Mincer Equation
Modern Approaches to Estimating the Private Returns to Schooling
DEEP DIVE: Estimating the Returns to Education Using Data on Identical Twins
DEEP DIVE: Estimating the Returns to Education Using "Random" Variation in Education from Quarter of Birth
6.3 Empirical Evidence on the Social Returns to Educational Attainment
Defining College Quality
6.4 Empirical Evidence on the Private Returns to Education Quality
Defining College Quality
DEEP DIVE: The Returns to Two- and Four-Year Colleges
DEEP DIVE: Estimating the Return to College Quality Using a Regression Discontinuity Design
6.5 Conclusion
Highlights
Problems

Chapter 7 How Knowledge is Produced: The Education Production Function
Opening Story Knowledge Production Versus the Production of Computers
7.1 Microeconomics of Production Functions
The Production FunctionChoosing Input Levels
DEEP DIVE: Technology in the Classroom: Changing Input Prices and Education ProductionThe Education Production Function with Many Inputs
7.2 Implications for Education Policy
Different Types of Education Policies
Theoretical Arguments for Different Education Policies
7.3 Challenges to Estimating Education Production Functions
Measuring Inputs
Measuring Outputs
Specifying the Production Process
Choosing the Unit of Analysis
7.4 Conclusion
Highlights
Problems

III. Elementary and Secondary Education Policy

Chapter 8. The Financing of Local Public Schools
Opening Story Serrano v. Priest
8.1 School Financing in the United States: Trends and Levels
DEEP DIVE: The Political Economy of Common Core Standards
8.2 Local School Choice: "Voting with your Feet"
The Free Rider Problem
The Tiebout Model
Challenges for the Tiebout Model
Empirical Evidence on Tiebout Sorting
8.3 The School Finance Reform Movement
Local Versus Centralized Financing
Judicial Action and Legislative Response
8.4 Forms of School Finance Centralization and Aid
The Community Budget Constraint
Block and Matching Grants
Actual State Aid Formulas
Paying for School Finance Equalization
DEEP DIVE: "Robin Hood and His not so Merry Plan"
School Finance Reform in Practice
8.5 Conclusion
Highlights
Problems

Chapter 9 Does Money Matter? The Effect of Resource and Input-Based Policies
Opening Story The Coleman Report
9.1 The "Hanushek Critique"
The Relationship Between Total Resource Policies and Outcomes
DEEP DIVE: The Relationship Between State Spending and Student Test Scores
Explanations for Small Total Resource Effects
Measurement Problems in Capturing Resource Effects
DEEP DIVE: The Effects of Education Resources on Long-run Outcomes
DEEP DIVE: The Effect of School Finance Reforms on Educational Outcomes
9.2 The Effect of Class Size Reduction Policies
Project STAR
DEEP DIVE: The Difficulty of Running a Social Experiment
DEEP DIVE: Long-Run Class Size Effects
Non-experimental Class Size Studies
Evidence from Policy Variation
DEEP DIVE: The California Class Size Reduction Policy
9.3 Teacher Quality
Value-Added and the Measurement of Teacher Quality
DEEP DIVE: Nonexperimental and Simulation Evidence on the Validity of Value-Added Models
How Much Does Teacher Quality Matter?
The Relationship Between Teacher Quality and Teacher Characteristics
9.4 Conclusion

Chapter 10 School Choice: A Market-based Approach to Education Reform
Opening StoryThe Founding of KIPP Schools
10.1 Economic Theory of School Choice
Matching Student Demand and Local Public SchoolsIntroducing School Choice Mechanisms
The Supply Side of the Market and School Choice
10.2 School Choice Policies
Charter Schools
Open Enrollment
Magnet Schools
Homeschooling
10.3. Effects of School Choice Policies on Student Outcomes
The Role of Selection in School Choice Studies
DEEP DIVE: The Harlem Children's Zone
DEEP DIVE: Parental Information about School Quality and Open Enrollment Policies
10.4 The Effect of School Choice Policies on Competition and Traditional Public Schools
Empirical Challenges
Evidence on How School Choice Policies Affect Competition and Traditional Public Schools
10.5 Conclusion

Chapter 11 Test-Based School Accountability Programs
Opening Story The Rise of Test-Based Accountability
11.1 Accountability: Measurement, Rewards and Punishment
What is Test-based Accountability?
School Accountability in the United States
DEEP DIVE: The Design of No Child Left Behind
11.2 School Accountability Measures
11.3 Do School Accountability Policies Change Student Performance?
The Effect of School Accountability Policies on Student Achievement
DEEP DIVE: The Effect of the Florida Accountability System on Student Achievement
Effects on the Distribution of Student Achievement
Explaining Achievement Effects: School Responses to Accountability Pressure
DEEP DIVE: How Schools and Teachers Respond to Accountability Pressure
"Unintended" Effects: Evidence of Gaming and Cheating
11.4 Do Student Accountability Policies Change Student Performance?
11.5 Conclusion
Highlights
Problems

Chapter 12 Teacher Labor Markets
Opening Story Classrooms without Teachers: The Teacher "Shortage" Problem
12.1 Supply and Demand in Teacher Labor Markets
Teacher Supply, Demand and Wage Schedules
Compensating Differentials
12.2 Who Becomes a Teacher (and Does it Matter)?
The Roy Model and Occupational Choice
Changes in the Composition of Teachers over Time
DEEP DIVE: The Link Between Teacher Wages and Student Outcomes
Teacher Mobility over the Career Cycle
12.3 Teachers Unions
What are Teachers Unions?
A Brief History of the Teacher Unionization and Collective Bargaining...