This article contributes to the literature on the effect of state and local education spending on U.S. state economic growth by separately analyzing higher and K-12 education spending and by taking into account the possibility that education spending may generate spillover effects to neighboring states. Results from a series of fixed-effects regressions using a 1992-2002 panel of state-level data indicate that increased spending on higher education generally exhibits a relatively large negative effect on private sector employment or gross state product growth when the increase in education spending is financed through own-source revenue. Results do not identify a statistically significant relationship between K-12 education spending and economic growth. This finding is an important clarification in the literature because an analysis of combined higher and K-12 education spending yields an overall negative effect. Results do not provide consistent evidence of cross-state spillover effects associated with either form of education spending.

Using a reduced form version of a theoretical expansion of Hoxby's (1996) education production model, we investigate whether bargaining teachers unions are a boon or a bust to the economy of the state. We anticipate teachers, being in the public sector veiled from competition, are less likely to be efficient. Yet, their product, education, enhances worker productivity and total output. If teachers are successful at their task of educating society's youth, their added value could be observed in society's production function. In a given state, gross state product (GSP) measures output from the use of capital and labor resources. By using GSP per employee as a measure of productivity, we find a negative correlation between GSP per employee and the percentage of unionized teachers within states where bargaining is permitted. Furthermore, we confirm a positive wage effect of teachers unions on state productivity. In addition, we investigate whether the negative changes in state GSP per employee and the positive wage effect offset each other in states with bargaining teachers unions.

In the processing industry, frequent faults call for assistance in diagnosis, and case‐based reasoning (CBR) can provide solutions applied by other operators in the past. This study investigated whether salient case ratings promote an uncritical acceptance of solutions. In 2 experiments, subjects diagnosed faults with a simulated CBR system, and ratings were presented in graphical or verbal format. In most trials, the case with the highest rating provided the correct solution, while in catch‐trials, it did not. Graphical ratings were hypothesized to speed up solutions but discourage cross‐checking and lead to errors in catch‐trials. These hypotheses were not confirmed, even though Experiment 2 maximized the incentive of relying on case ratings. While graphical ratings led subjects to start with the most highly rated case, they did not impair situation analysis and accuracy. The results suggest that during fault diagnosis people are not easily misled into overtrusting a CBR system.

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