Managing size of public schools and school boards: A multi-level cost approach applied to dutch primary education

In many countries, the provision of primary education is among the core responsibilities of local governments. One of the main questions local governments face concerns the optimal configuration of school boards and size of schools. In this paper we analyse the relation between cost and scale in school boards and in schools. The influence of both the governing layer (board) and the operational layer (school) on average cost are jointly modelled. Board cost is modelled as an aggregation of individual school cost functions so that individual school cost data are not required in order to estimate the model. The results indicate that small schools (<60) pupils are operating under sizable economies of scale. The optimum school size is estimated at roughly 450 pupils, but average cost remains roughly constant with regard to size. In contrast to school size, the effect of board size (in terms of the number of schools governed) on average cost is limited. The policy recommendation is that municipalities should create at least three schoolboards within their jurisdiction and take measures in case individual school size declines below 60 pupils.