Measuring equity of educational outcomes in the presence of inefficiency

Disparities in school expenditures have been a major concern in school finance. Equalization of spending presumably fulfills the ideal of equal educational opportunity. Differences in spending, however, result not only from differences in service provision, but also from variations in resource prices, exogenous cost environments and efficiency. As a result, equity measures that use expenditures per pupil as the object will capture these other variations and, therefore, may not be indicative of unequal educational outcomes. The purpose of this paper is to provide a systematic non-parametric framework for measuring outcome equity of school districts. Data Envelopment Analysis is used to adjust expenditures for differences in cost environments and to control for inefficiency in New York State school districts. The results suggest that nearly one-half of the measured inequity can be attributed to sources other than disparities in outcomes.