Money and management: do they matter? Texas school districts revisited

Cost-efficiency and cost-effectiveness are neglected aspects of public sector performance in public administration research. This paper introduces stochastic frontier analysis, a well known technique from productivity analysis, into public management research, to fill those gaps. An empirical illustration is given for Texas school districts, using the well developed database set up by Meier et al in the last decade. The results show substantial economies of scale for many small schooldistricts, but also diseconomies of scale for districts enrolling more than 12,000 students, after correcting for the share of low income students and using an output variable that incorporates pass rates from the state wide TAKS-test. We find evidence for the positive impact of performance-related priorities of top managers on cost effectiveness, and similar benefits from decentralizing decisions to lower management. An unexpected result is the absence of the disciplining force of local taxpayers on cost effectiveness. We find a positive impact on cost effectiveness from a stable teacher workforce, already demonstrated earlier to be beneficial for educational outcomes. The benefits of external networking, although shown to be positively related to educational outcomes in earlier work, do not to seem to exceed their costs, however. Indications for future research, in particularly aimed at increasing knowledge on the implicit and explicit price of managerial activities, are given.