Labor Market Frictions and Production Efficiency in Public Schools

Dongwoo Kim
Shawn Ni

State-specific licensing policies and pension plans create mobility costs for educators who cross state lines. We empirically test whether these costs affect production in schools – a hypothesis that follows directly from economic theory on labor frictions – using geocoded data on school locations and state boundaries. We find that achievement is lower in mathematics, and to a lesser extent in reading, at schools that are more exposed to state boundaries. A detailed investigation of the selection of schools into boundary regions yields no indication of systematic differences between boundary and non-boundary schools along other measured dimensions. Moreover, we show that cross-district labor frictions do not explain state boundary effects. Our findings are consistent with the hypothesis that mobility frictions in educator labor markets near state boundaries lower student achievement.

Aug 2017