Government secondary school finances in New South Wales: accounting for students’ prior achievements in a two-stage DEA at the school level

This study measures the efficiency of government secondary schools in New South Wales, Australia, using a two‐stage semi‐parametric production frontier approach to schooling. In contrast to previous research comparing school performance with two‐stage data envelopment analysis (DEA), we control for prior academic achievement of students by using a rich data set from 2008 to 2010. We employ detailed financial data for deriving the envelope for the efficient production frontier of the schools. Using Simar and Wilson’s (J Econ 136:31‐64, 2007, J Prod Anal 36:205‐218, 2011a) double bootstrap procedure for two‐stage DEA, the study finds that schools with lower total student numbers, a higher average of years of service of teachers, a higher ratio of special education students that attracts extra government funding, and girls only do better than other schools. On the other hand, a negative influence comes from a school’s location in provincial and outer metropolitan areas. An important result is that the socio‐economic background of students attending a school has no significant effect on their academic performance, whereas higher prior academic achievements have a positive and statistically significant impact on student achievement. These results are relevant to decision makers for the school sector, in particular for funding criteria contained in the Gonski (Review of funding for schooling ‐ Final report (December). Canberra: Commonwealth Government of Australia, 2011) review report.