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2. The high school dropout rate, for instance, only reflects variation in the outcomes of lowachieving students. Students' self-selecting into the tests generates incurable biases when the Scholastic Aptitude Test (SAT) or ACT (formerly known as the American College Testing Program) is used for comparisons over time or across schools. The SAT and ACT also only reflect variation in the outcomes of high-achieving students. High school grades have been shown to be relative measures that cannot be compared successfully across schools.

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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. Oxford University Press is collaborating with JSTOR to digitize, preserve and extend access to The QuarterlyThis study helps to explain why measured school inputs appear to have little effect on student outcomes, particularly for cohorts educated since 1960. Teachers' unionization can explain how public schools simultaneously can have more generous inputs and worse student performance. Using panel data on United States school districts, I identify the effect of teachers' unionization through differences in the timing of collective bargaining, especially timing determined by the passage of state laws that facilitate teachers' unionization. I find that teachers' unions increase school inputs but reduce productivity sufficiently to have a negative overall effect on student performance. Union effects are magnified where schools have market power. I. INTRODUCTIONThis study is motivated by two related empirical puzzles. The first is that student-level and school-level data often show little evidence of a relationship between student performance and school inputs, after controlling for the student's background [Hanushek 1986;Betts 1995;Grogger 1995].1 The second is that metropolitan areas with few opportunities for competition among public schools tend to have more generous school inputs-including higher per-pupil spending, higher teacher salaries, and lower student-teacher ratios-but also tend to have worse student performance [Hoxby 1995a]. These empirical results suggest the existence of some school characteristic that tends to increase inputs while tending, at the same time, to lower the effectiveness of each input. Teachers' unions, while not the only candidate for this role, are worth examining since they try to obtain more generous inputs and have the potential to change the efficacy of inputs. Since teachers' collective bargaining is a phenomenon of the past 35 years, the evidence presented not only helps to explain the empiri-*For helpful comments I am grateful to 672 QUARTERLY JOURNAL OF ECONOMICS cal puzzles mentioned, but can potentially explain differences between studies of school inputs based on cohorts educated prior to 1960, such as Welch [1966], Johnson and Stafford [1972], and Card and Krueger [1992a, 1992b], which often find significant improvement in student performance, and those based on cohorts educated after 1960, such as the studies cited initially, which do not find improvement.How teachers' unions affect the educational production function is an empirical question and an open one at that. Theory suggests two reasons teachers might demand a union. The first assumes that teachers maximize the same objective function as parents, student achievement, but that inf...

Tiebout choice among districts is the most powerful market force in American public education. Naive estimates of its effects are biased by endogenous district formation. I derive instruments from the natural boundaries in a metropolitan area. My results suggest that metropolitan areas with greater Tiebout choice have more productive public schools and less private schooling. Little of the effect of Tiebout choice works through its effect on household sorting. This finding may be explained by another finding: students are equally segregated by school in metropolitan areas with greater and lesser degrees of Tiebout choice among districts. (JEL H70, I20)

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