Brookings-Wharton Papers on Urban Affairs 2002

Brookings-Wharton Papers on Urban Affairs 2002

by William G. Gale

Designed to reach a wide audience of scholars and policymakers, this new series contains studies on urban sprawl, crime, taxes, education, poverty, and related subjects. "This journal will set the tone for urban economics for the coming decades. It will play a major role not only in academia, but also in ensuring that we have better urban economic policy."


Designed to reach a wide audience of scholars and policymakers, this new series contains studies on urban sprawl, crime, taxes, education, poverty, and related subjects. "This journal will set the tone for urban economics for the coming decades. It will play a major role not only in academia, but also in ensuring that we have better urban economic policy." —George Akerlof, University of California, Berkeley Contents of the third issue include: "Local Government Fiscal Structure and Metropolitan Consolidation" Dennis Epple (Carnegie-Mellon University), Stephen Calabrese (University of South Florida), and Glenn Cassidy Should the Suburbs Help Finance Central City Public Services? Andrew Haughwout (Federal Reserve Bank of NY) and Robert Inman (University of Pennsylvania) "Tax Incentives and the City" Therese McGuire (UCLA) and Teresa Garcia-Mila (Universitat Pompeu Fabra) "Does Gentrification Harm the Poor?" Jacob Vigdor (Duke University) "Corruption in Cities: Graft and Politics in American Cities at the Turn of the Twentieth Century" Rebecca Menes (George Mason University) "Immigrant Children and Urban Schools: Lessons from New York on Segregation, Resources and School Attendance Patterns" Ingrid Gould Ellen, Katherine O'Regan, Amy Ellen Schwartz, and Leanna Stiefel (New York University) William G. Gale is the Arjay and Frances Fearing Miller Chair in Federal Economic Policy in the Economic Studies program at the Brookings Institution. Janet Roterber Pack is professor public policy and management and real estate at the Wharton School, University of Pennsylvania.

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Brookings-Wharton Papers on Urban Affairs

By William G. Gale

Brookings Institution Press

Copyright © 2002 William G. Gale
All right reserved.

ISBN: 0815730772

Chapter One

Editor's Summary

The Brookings-Wharton Papers on Urban Affairs offers cutting-edge research, presented in accessible ways, to help inform the academic research and policy debates on issues unique to urban areas. Broader economic and policy topics that have special applicability to urban settings are also treated. The papers and comments contained in this volume were presented at a conference at the Brookings Institution on October 24 and 25, 2002.

The papers are divided into two groups. This year's symposium focuses on urban education. Brian A. Jacob and Steven D. Levitt report the results of an experiment designed to detect cheating on standardized tests in Chicago Public Schools. Thomas Nechyba examines the impact of school reform in an urban setting by developing a simulation model in which parents choose where to live, decide whether their children attend public or private schools, and vote on tax levels. Thomas J. Kane, Douglas O. Staiger, and Gavin Samms evaluate the effect of school quality, as measured by local school test scores and composite school ratings, on housing values in Mecklenburg County, North Carolina. Brian A. Jacob explores the determinants of improved academic performance in Chicago Public Schools. The volume includes two other research papers on current issues in urban economics. Douglas S. Massey and Mary J. Fischer document expanding economic inequality across and within geographic regions. Bengte Evenson and William C. Wheaton explore local variation in land use regulations among towns in Massachusetts.

Symposium on Urban Education

Education is one of the most important services provided by urban and local governments. But many large urban school districts in the United States serve their students poorly, as indicated by low test scores, high dropout rates, high rates of teacher turnover, and other problems. These deficiencies have led affluent families with children to leave cities for the suburbs or to move their children to private schools. To the extent that such families move, urban tax bases and economic activity are reduced. To the extent that good students move to private schools, the average academic quality of the remaining public school students falls, which can reduce the quality of the education received in the public schools through the influence on peer group effects and expenditure on schools. For all of these reasons, education reform has emerged as a key issue in urban areas.

Catching Cheating Teachers: An Unusual Experiment

One approach to improving urban schools involves greater emphasis on high-stakes testing. Under this plan schools will be held accountable, through a variety of sanctions, for their students' failure to attain certain scores on standardized tests. Supporters claim that testing provides accountability and raises test scores. Critics note that test score gains have been shown to be test specific, and thus progress may be ephemeral. Another concern is that the emphasis on high-stakes testing may increase the temptation for students, teachers, and administrators to cheat on standardized tests.

Jacob and Levitt examine cheating by teachers using a methodology they developed in previous work. Roughly 100,000 Chicago Public School students take the Iowa Test of Basic Skills each spring, with retesting occurring in 117 classrooms three to four weeks later. Jacob and Levitt use a multinomial logit framework with past, current, and retest scores, demographics, and socioeconomic characteristics as explanatory variables to identify suspicious answer strings (a series of answers to consecutive questions). The authors look at cheating in three types of classrooms: those with unusually large test score gains and highly suspicious patterns of answer strings; classrooms with suspicious answer strings but without unusually large test score gains; and classrooms with anonymous allegations of cheating. They compare the retest performance of these classrooms to two control groups that are not suspected of cheating: classrooms with large test score gains but not suspicious answer strings and classrooms that were chosen at random.

The main result is that classrooms that were suspected of cheating-based on the authors' methodology for identifying suspicious answer strings-saw dramatic declines in test results in the retest relative to the original test, while the control classrooms saw little change in test results. Test score declines were more than one grade-equivalent on average in twenty-nine classrooms out of the seventy suspicious classrooms that were retested. After the retest, school administrators in two schools were suspected of complicity in cheating, given that a significant number of classes in their schools were identified as having cheated. Consequently, the teachers and administrators suspected of cheating were subject to further investigation.

Public School Finance and Urban School Policy

Much analysis of the determinants of school quality focuses narrowly on the effects of financial resources on school performance. In contrast, Thomas Nechyba explores how financing alters school quality in a framework that explicitly incorporates the fact that financing changes may alter the characteristics of neighborhoods, private school attendance rates, and political voting outcomes. He develops these insights in a simulation model calibrated to data from the New Jersey suburbs of New York City. By examining the various policies in a single, consistent model, he is able to isolate the interlocking roles of different factors in determining the impact of changes in school finance. Nechyba examines the effects of centralizing school finance, changing state aid formulas, and issuing state-funded vouchers. A major result of the analysis is that the general equilibrium effects of policy changes on school quality-for example, those that arise from households moving or students changing from public to private schools-often dominate the direct effects of resource levels on school performance. Among the results: centralization raises housing prices, reduces private school attendance, reduces spending per pupil in public schools, and narrows school quality differences across districts as spending is equalized. Funding formulas that provide state aid programs not targeted at poor school districts result in school improvement in wealthy districts and also cause larger inequalities across districts. However, targeted state aid administered only to poor school districts achieves greater increases in school quality for all schools. State-funded vouchers would reduce quality at poor-performing public schools as students choose to attend better public and private schools. Families in wealthier neighborhoods move to areas with more affordable housing and, using their vouchers, send their children to private school. As a result of these two changes, overall average school quality in poor districts increases slightly because the quality of the new private schools is higher than public schools, and there is a negative effect on public schools in the wealthier districts as well as declining public support for public schools.

School Accountability Ratings and Housing Values

Previous research has found a strong connection between student test scores at neighborhood schools and housing values at a point in time, but there is less evidence on how those variables evolve. This issue, however, will become more important over time as the No Child Left Behind Act of 2001 requires states to test all students in grades three through eight and publicly report the results.

Thomas J. Kane, Douglas O. Staiger, and Gavin Samms evaluate the effects on housing values of test scores and composite school ratings. Using data on the sales prices of homes in Mecklenburg County, North Carolina, they find that a school's long-term average test scores affect housing values in the immediate neighborhood, but that year-to-year fluctuations in scores do not. This suggests that homeowners care about school quality but are aware of how "noisy" test scores can be.

The authors also find that test scores may be related to unmeasured housing and neighborhood characteristics. This idea suggests that people tend to buy houses where they do because of their peers. Housing values tend to be higher closer to a neighborhood school, particularly in poor neighborhoods, and respond more strongly to test scores of white students than of black students. The study also shows that, when composite school ratings were introduced, local house prices did not decline in response to state ratings of "low performing" for local schools. This may imply that residents already knew that these schools were low performing.

Accountability: Lessons from Chicago

After instituting high-stakes testing in 1996, the Chicago Public Schools realized a significant increase in test scores. Little is understood, however, about how high-stakes testing affects performance. Supporters of the program claim that testing makes teachers and students work harder and helps schools become more efficient. Critics claim the rules lead to "teaching to the test" and to reallocations of resources away from nontested subjects like physical education, art, music, and social studies.

Brian Jacob examines the effects of the accountability policies instituted by the Chicago Public Schools (CPS) using school budget information for 456 elementary schools in 1995 and 2000. He distinguishes between changes in educational inputs-including student effort, parental involvement, financial resources-and changes in school technology -such as instructional practices and school organization.

He finds that most of the improvement in CPS scores comes from non-financial inputs like student effort and parental involvement rather than technological improvements. Schools made few changes to financial allocations or school organization. For example, low-achieving schools shifted only a small amount of resources away from nontested areas, like art and music, and the changes in spending are not related to changes in student achievement. Most of the increase in spending was to hire more teachers or raise teachers' salaries rather than to create new positions. Educational efforts by students have had a greater effect on student achievement than changes in instructional practices or school organization. The findings will prove relevant as the federal government begins to implement the No Child Left Behind education policy that was enacted in 2001.

Other Research

Besides the papers on education reform, the volume contains two papers and discussants' comments related to other current issues in urban economics. These papers illustrate the broad reach of urban issues and their overlap with the concerns of many other fields in economic research and public policy.

The Geography of Inequality, 1950-2000

Although trends in income inequality have received substantial attention during the past two decades, trends in the geographic distribution of income have been left relatively unexamined. As the affluent and poor live increasingly isolated from one another, the social and economic worlds and interests of the two groups will naturally diverge, with important implications for public finance and the provision of public services.

Using data available from 1950 to 2000, Douglas S. Massey and Mary J. Fischer measure trends in class segregation and income concentration at the regional, state, and metropolitan levels, and on the neighborhood level for sixty metropolitan areas. The authors find that income and class segregation declined during the past half-century as the rich and poor have become more evenly distributed throughout the country. They also show that the degree of spatial separation between affluent and poor families declined on the regional, state, and metropolitan levels. These findings reflect the creation of new affluence in the South and new poverty in the Northeast, Midwest, and West. The concentration of affluence and poverty, however, has increased in neighborhoods, leading to significant class segregation within metropolitan areas.

Income segregation measures the degree of social and class segregation between poor and affluent families. Massey and Fischer find that during the past half-century, rich and poor have become more evenly distributed throughout the country. On the regional level, income segregation is the lowest and declined by more than half between 1950 and 2000. Similarly, income segregation decreased by nearly 40 percent for states and one-third in metropolitan areas. However, census-tract-level segregation in sixty metropolitan areas has increased dramatically between 1970 and 2000, indicating significant growth in class segregation within neighborhoods. The authors also examined income segregation by race and found that in the regions, states, and metropolitan areas, both blacks and whites experienced a comparable decrease in income segregation over the period. The tract-level data tell a different story as income segregation within both races has increased since 1970 and moderated only slightly during the 1990s.

Falling income inequality, declining poverty rates, and class segregation from 1950 to 2000 also produced declines in the geographic concentration of poverty at the regional, state, and metropolitan levels. Overall, the concentration of poverty fell sharply and hit a fifty-year low in 2000. Poverty isolation is greater for African Americans, since far more blacks live in the south and thus are distributed more unevenly than whites. The concentration of poverty in neighborhoods of metropolitan areas, in contrast to the decrease in overall concentration, increased by 80 percent between 1970 and 2000. Moreover, the concentration of poverty within neighborhoods for black families exceeded that for white families in each decade from 1970 through 2000.

According to Massey and Fischer, the concentration of affluence in regions, states, and metropolitan areas increased between 1950 and 2000. Since class segregation and income inequality declined, the growth in the concentration of affluence is attributed to the increasing proportion of affluent families. This is also true on the neighborhood level. By 2000, the concentration of affluence in metropolitan neighborhoods was greater than the concentration of poverty. However, the authors find that the concentration of affluence does not differ by race in regions, states, or metropolitan areas. However, the concentration of affluence was greater for whites than blacks within neighborhoods.

Massey and Fischer show that rich and poor families came to inhabit the same regions, states, and metropolitan areas while simultaneously moving into different neighborhoods segregated by class.



Excerpted from Brookings-Wharton Papers on Urban Affairs by William G. Gale Copyright © 2002 by William G. Gale. Excerpted by permission.
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Meet the Author

William G. Gale is a vice president and director of the Brookings Institution's Economic Studies program, where he holds the Arjay and Frances Fearing Miller Chair in Federal Economic Policy. He is also founding codirector of the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute. Janet Rothenberg Pack is professor of business and public policy and real estate at the Wharton School, University of Pennsylvania.

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