Maurer, Stephan E.

LSE Research Online

Public	education	benefited	from	oil	booms	in	thepostbellum	SouthNatural	resources	are	often	thought	as	a	curse,	rather	than	a	blessing.	They	have,	for	example,	been	found	to	helpentrench	autocratic	regimes,	impede	female	labor	market	involvement,	and	fuel	both	intra-state	wars	and	internalconflicts.Granted,	natural	resources	typically	increase	local	government	revenue:	counties	or	regions	with	oil,	gas,	or	preciousmetal	deposits	typically	can	expect	royalties	or	increased	tax	revenue	from	the	extraction	of	these	deposits.However,	previous	evidence	suggests	that	not	even	this	works	as	well	as	it	should,	since	the	increased	revenue	isoften	associated	with	only	little	improvement	in	welfare-relevant	outcome	for	local	citizens.	Instead,	money	fromroyalties	often	seems	to	get	“lost”,	and	corruption	increases.In	a	recent	study,	I	analyse	how	local	oil	booms	in	the	Southern	United	States	during	the	first	half	of	the	20th	centuryaffected	public	spending,	focusing	on	education	expenditures.	This	time	and	region	are	particularly	interesting	forseveral	reasons.Firstly,	the	institutional	set-up	of	the	US	South	at	this	time	was	markedly	different	from	many	modern	settings.Instead	of	centrally	allocated	oil	royalties,	oil-rich	counties	benefited	from	oil	extraction	through	local	property	taxes,and	these	local	property	taxes	were	a	key	source	for	school	funding.	This	institutional	set-up	made	it	particularlylikely	that	oil	funds	actually	made	their	way	to	education	spending.	However,	of	course	increased	spending	does	notnecessarily	lead	to	better	outcomes.Secondly,	the	South	in	the	early	20th	century	was	still	marked	by	a	great	racial	disparity	in	education	provision.	Blackstudents	were	slowly	catching	up	in	terms	of	literacy,	school	enrollment	and	other	educational	outcomes,	but	underthe	“separate	but	equal”	doctrine,	they	were	still	heavily	disadvantaged.	It	is	therefore	not	clear	ex	ante	whether	anyincreased	education	spending	from	higher	property	tax	revenue	would	also	have	benefited	the	most	needy,	i.e.	blackstudents.Finally,	many	Southern	states,	especially	Texas,	Louisiana,	and	Oklahoma,	are	rich	in	oil	deposits	and	discoveredthese	oil	deposits	for	the	first	time	during	the	early	20th	century.	I	use	these	discovery	events	as	a	natural	experimentto	analyse	how	oil	wealth	in	the	US	South	affected	education	provision.	In	particular,	I	study	how	outcomes	evolvedin	counties	that	have	large	oil	fields	compared	to	those	that	do	not	before	and	after	the	respective	discoveries.	Usingthis	so-called	“difference-in-differences”	strategy,	I	do	indeed	find	that	oil-rich	counties	experienced	increased	taxrevenue	and	spent	more	on	education.	What	is	more,	I	find	that	at	least	part	of	this	spending	went	into	blackeducation.LSE Business Review: Public education benefited from oil booms in the postbellum South Page 1 of 2		Date originally posted: 2018-04-11Permalink: http://blogs.lse.ac.uk/businessreview/2018/04/11/public-education-benefited-from-oil-booms-in-the-postbellum-south/Blog homepage: http://blogs.lse.ac.uk/businessreview/According	to	my	results,	oil-rich	counties	were	more	likely	to	participate	in	the	“Rosenwald	program”	that	providedmatching	grants	to	communities	willing	to	build	schools	for	rural	black	children.	They	provided	more	public	funds	toparticipate	in	the	program,	constructed	more	schools	and	hired	more	teachers	for	these	schools.Figure	1.	A	former	Rosenwald	school	in	Cass	County,	TexasNote:	Photo	by	Tim	Dowd,	under	a	CC-BY-SA-3.0	licenceIn	line	with	this,	I	also	find	that	theoretical	student-teacher	ratios	for	black	children	declined	in	counties	withdiscovered	oil	fields.	White	students	also	benefited	from	oil	discoveries,	but	in	a	different	form:	Cross-sectionalevidence	from	the	1940	US	Census	indicates	that	they	could	enjoy	better-educated	and	better-paid	teachers.Overall,	it	thus	seems	that	the	institutional	set-up	in	the	United	States	was	able	to	translate	resource	windfall	revenueinto	improved	education	provision.	In	addition,	at	least	some	of	this	windfall	helped	provided	better-quality	school	forblacks.♣♣♣Notes:This	blog	post	is	based	on	the	author’s	paper	Oil	Discoveries	and	Education	Spending	in	the	Postbellum	South,Discussion	Paper	No	1526	of	LSE’s	Centre	for	Economic	Performance	(CEP),	January	2018	The	post	gives	the	views	of	its	authors,	not	the	position	of	LSE	Business	Review	or	the	London	School	ofEconomics.Featured	image	credit:	Oil	Field	Scene,	East	Texas,	SMU	Central	University	Libraries,	Flickr	CommonsWhen	you	leave	a	comment,	you’re	agreeing	to	our	Comment	Policy.Stephan	Maurer	is	an	Assistant	Professor	of	Economics	at	the	University	of	Konstanz	and	anAssociate	at	the	LSE’s	Centre	for	Economic	Performance.	His	research	interests	include	laboureconomics,	economic	history,	and	economic	geography.		LSE Business Review: Public education benefited from oil booms in the postbellum South Page 2 of 2		Date originally posted: 2018-04-11Permalink: http://blogs.lse.ac.uk/businessreview/2018/04/11/public-education-benefited-from-oil-booms-in-the-postbellum-south/Blog homepage: http://blogs.lse.ac.uk/businessreview/

Public education benefited from oil booms in the postbellum South

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Public education benefited from oil booms in the postbellum South

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