Evidence on the impact of state government on primary and secondary education and the equity-efficiency trade-off

State governments may affect the productivity of primary and secondary educ ation in two ways. First, various regulations imposed on local school distr icts are expected to make schools less efficient. Second, state efforts to reduce inequality in education spending make it more difficult for voters t o increase school quality, which should lead to less voter monitoring of sc hools and thus less efficient schools. Our empirical analysis of state Scho lastic Aptitude Test (SAT) scores from 1987 to 1992 provides evidence on bo th effects. The state's revenue share, which captures state meddling in loc al decisions, has the expected negative impact on school efficiency. But ou r novel result is that state-induced spending equalization also lowers aver age test scores but has had little if any effect on reducing the disparity in student achievement. These results bring into question policy efforts de signed to shift education responsibilities from local governments to state and federal governments.