Sandra McNally surveys CEP evaluations of a wide range of school policies in the UK. Education is a key policy instrument for addressing unemployment, rising inequality and falling intergenerational mobility, the social problems that were the focus of the first three contributions to CEP's 'big ideas' series. In the latest overview of the Centre's research, Sandra McNally surveys evaluations of a wide range of school policies in the UK.

Sandra McNally

English

Research Papers in Economics

Education is a key policy instrument for addressing unemployment, rising
inequality and falling intergenerational mobility, the social problems that
were the focus of the first three contributions to CEP’s ‘big ideas’ series.
In the latest overview of the Centre’s research, Sandra McNally surveys
evaluations of a wide range of school policies in the UK.
Bigide
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E
ducation is central to public
policy debates in both
developed and developing
countries. These are some of
the reasons why:
  First, it is well known that education is
one of the best ‘investments’ that
individuals can make: this claim is
backed by extensive research on the
private monetary returns to education.
  Second, education is associated with
other, non-monetary benefits for
individuals, such as better health and
less involvement in illicit activities.
  Third, research in macroeconomics
highlights the importance of the
accumulation of human capital for
growth and development. 
As these findings suggest, economics
makes many significant contributions to
education research. The origins of the
economics of education as a significant
field are in the 1960s and 1970s with the
work of Gary Becker, Ted Schultz and
Jacob Mincer (though many issues go
back much further than that). In the last
decade, there has been a resurgence of
interest in education among economists
and CEP researchers have played a central
part in this work (Machin, 2008; Machin
and Vignoles, 2005).
CEP is one of the founding partners of
the Centre for the Economics of Education
(CEE), which was set up in 1999 by the
then Department for Education and Skills.
The education group at CEP has made a
contribution to many important policy
questions as well as advancing academic
research in this area.
One of the big questions addressed by
our research is what works (or not) to
improve school performance. More
specifically, what are the consequences of
various types of school policy and
institutional structures for raising
educational standards in schools? And do
these policies and structures benefit some
children more than others?
Politicians of all persuasions have put
faith in the market as a means of raising
Educationas
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educational standards. There is much talk
of the benefits of choice and competition.
The idea is that with parents able to choose
any school they want for their children (at
least in theory) and being able to judge the
performance of schools through ‘league
tables’, schools will be under pressure to
improve their performance – particularly
since their funding is tied to how many
pupils they have.
Whether such a policy works is an
empirical question. The recent availability
of detailed pupil-level data – the National
Pupil Database – has made it possible for
this issue to be analysed rigorously for the
first time and CEP researchers have used
these data, making full use of advances in
econometric and spatial modelling
techniques.
One CEE study evaluates whether
primary schools in England that face more
competition perform better than schools
in less competitive situations, and whether
parents who have more choice of where
to send their children actually see gains for
their children in terms of academic
performance (Gibbons et al, 2008).
Offering parents
a wider choice
of schools and
forcing schools
to compete does
not seem to be 
a remedy for
poor standards
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This research finds little evidence 
of a link between choice and
achievement, and only a small positive
association between competition and
school performance (which is not causal).
Moreover, there is some evidence that
greater competition can actually be
deleterious by creating ‘stratification’,
where pupils of different abilities are less
likely to be educated together.
These findings suggest that simply
offering parents a wider choice of schools
and forcing schools to compete does not
seem to be a remedy for poor standards in
education. So do more traditional
‘resource-based’ policies fare any better?
Over the last ten years, there has been
a huge increase in investment in
education. Spending on schools has
increased by around 40% since 2000.
There has also been a range of 
specific initiatives, often focusing on
disadvantaged areas – for example, the
‘Excellence in Cities’ programme and
academy schools. CEP researchers have
been involved in the evaluation of these
programmes as well as investigating
whether the general rise in spending has
produced positive effects.
CEP’s evaluation of academy schools is
still in progress (see the next article in this
CentrePiece for the initial findings).
Evaluation of ‘Excellence in Cities’ shows
an improvement in educational outcomes
of secondary school pupils for a modest
increase in per pupil expenditure. The
effect is bigger for particular sub-groups,
notably the most able pupils in schools
with the highest rate of deprivation
(Machin et al, 2007).
This is an example of a high profile
government policy where rigorous analysis
has been possible because of the ability to
construct a suitable control group. The
availability of good data has also made
possible a thorough analysis of whether
the general rise in expenditure has
improved educational attainment at the
end of primary school. The study shows
that the effects of higher expenditure have
been consistently positive across all areas
tested at the end of primary school
(Holmlund et al, 2008). 
The magnitude of the effect suggests
that the policy of increasing school
spending over the past few years has been
worth the investment. While this is good
news for advocates of increased public
spending on education, it remains the 
case that far too many young people leave
the system with little or no qualifications.
The UK also has a poor international
standing with regard to young people
who are classified as ‘not in education,
training or employment’.
Indeed, it has been difficult to help the
‘hardest to reach’. Even the ‘Excellence in
Cities’ programme was unable to do much
for the attainment of low ability pupils in
disadvantaged schools. Thus, how to
tackle the ‘long tail’ of the distribution of
educational attainment remains a
challenging issue for the future. 
Addressing these issues also requires a
better understanding of the consequences
of, on the one hand, different pedagogical
approaches and, on the other, school
structures, such as school governance and
management. One example of CEP
research on pedagogy is the evaluation of
the ‘literacy hour’, which shows that this
fundamental change to how literacy is
taught in schools in England has raised
standards at very low cost (Machin and
McNally, 2008).
Research on the importance of school
structures suggests that the autonomy
enjoyed by voluntary-aided schools might
explain their higher performance (Gibbons
and Silva, 2006). Our programme of
research continues to explore these issues. 
Whichever way school performance
can be improved – whether by changes in
resources, pedagogy or structures – we
also need to know the economic value of
changes in human capital. CEP and CEE
researchers have contributed to measuring
the value of educational qualifications in
the labour market (Machin and Vignoles,
2005), and this issue has wider relevance
to other CEP research programmes on
macroeconomics, globalisation and
productivity.
CEP researchers have also measured
how parents value school performance
using data on property prices (Gibbons
and Machin, 2003). In this study, spatial
The effects of
higher spending
have been
consistently
positive across
all areas tested
at the end of
primary schoolCentrePiece Spring 2009
5
modelling methods identify how much
parents are willing to pay to move into the
catchment area of a better performing
school. The results show that parents are
willing to pay sizeable amounts to ‘buy in’
to an area served by primary schools with
higher achievement.
This work illustrates how admissions
policies based on residential proximity
(combined with the workings of the
property market) contribute to income-
based segregation in schooling. As well as
being socially undesirable in itself, such
segregation may be a driver of educational
inequality through ‘peer effects’. 
As previous contributions to the ‘big
ideas’ series show, CEP researchers have
been major contributors to what is known
about educational inequality and how this
relates to social mobility.
Sandra McNally is director of CEP’s
education and skills programme and a 
deputy director of CEE.
Further reading
Stephen Gibbons and Stephen Machin (2003)
‘Valuing English Primary Schools’, Journal of
Urban Economics 53: 197-219.
Stephen Gibbons, Stephen Machin and Olmo
Silva (2008) ‘Choice, Competition and Pupil
Achievement, Journal of the European
Economic Association 6(4): 912-47.
Stephen Gibbons and Olmo Silva (2006) ‘Faith
Primary Schools: Better Schools or Better
Pupils?’, CEE Discussion Paper No. 72 
(http://cee.lse.ac.uk/cee%20dps/ceedp72.pdf).
Helena Holmlund, Sandra McNally and
Martina Viarengo (2008) ‘Research on the
Impact of School Resources on Attainment at
Key Stage 2’, report to the Department for
Children, Schools and Families.
Stephen Machin (2008) ‘The New Economics
of Education: Methods, Evidence and Policy’,
Journal of Population Economics 21: 1-19.
Stephen Machin and Sandra McNally (2008)
‘The Literacy Hour’, Journal of Public
Economics 92: 1441-62.
Stephen Machin, Sandra McNally and Costas
Meghir (2007) ‘Resources and Standards in
Urban Schools’, CEE Discussion Paper No. 76
(http://cee.lse.ac.uk/cee%20dps/ceedp76.pdf).
Stephen Machin and Anna Vignoles (2005)
What’s the Good of Education? 
The Economics of Education in the UK,
Princeton University Press.
The UK’s ‘long tail’ of people
with low educational attainment
remains a challenging issue
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Big ideas: education

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Big ideas: education

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