The Political Economy of School District Mergers

Joint with: Nora Gordon

The number of school districts in the United States has fallen from around 130,000 in 1930 to just under 15,000 at present. Despite this large observed decline, many districts

resisted consolidation before ultimately merging and others never merged, choosing to remain at enrollment levels that nearly any education cost function would deem inefficiently

small. Why do some districts voluntarily integrate while others remain small, and how do those districts that do merge choose with which of their neighbors to do so? In addresing these questions, we empirically examine the role of potential economies and diseconomies of scale, the loss in autonomy associated with heterogeneity between merger partners, and the role of state governments. We first develop a simulaton-based estimator that is rooted in the economics of matching and thus accounts for three impor-

tant features of typical merger protocol: two-sided decision making, multiple potential partners, and spatial interdependence. We then apply this methodology to examine

the determinants of a wave of school district mergers in the state of Iowa during the 1990s. Preliminary results highlight the importance of economies of scale, diseconomies

of scale, and state Â…nancial incentives for consolidation.

For more information, contact Antonio Merlo.