The Effect of Extra School Funding on Students’ Academic Achievements under a Centralized School Financing System

Abstract This paper analyzes the effect of providing extra school funding on student achievement under the homogenous school funding system in South Korea. This study exploits an administrative cutoff rule that determines the provision of school funding and uses a regression discontinuity design to identify a causal impact of extra school funding. The analysis finds that a 20 percent increase in per pupil funding for underperforming schools reduced the number of below-average students in mathematics, English, social studies, and science by 19.7 percent, 17.0 percent, 16.1 percent, and 18.1 percent compared with the control-side means. The research findings suggest that additional funding for underperforming schools to promote vertical equity would improve students’ academic outcomes if it is distributed directly to underperforming schools and used to provide new academic programs to students.