Economies of scale - a second look at the data

Abstract

The University of Otago Consulting Group were engaged by the Fine Tuning Task Force of the Ministry of Education "" ... to assist in determining whether the assumed economies of scale in the present school funding formulae for primary and secondary schools indeed exist."" A survey of schools was conducted between late 1990 and early 1991 and the results of were published by the Consulting Group in June 1991 (Rothstein, Wilson and MacGibbon, 1991). The study possessed a number of shortcomings which may mean that the report's conclusions are invalid: the schools were having to adjust to a substantial change in financial management, very few schools were used in the study, the schools were not selected according to a random allocation, data analysis and modelling were inadequate and basic assumptions concerning the validity of marginal cost analysis were overlooked.