School Financing, Teacher Wages and Educational Outcomes: Evidence from the Russian School System

In this study we test how the level of school financial resources and relative teacher wages affect educational outcomes. Russia provides a good opportunity for testing this relationship due to its high regional heterogeneity. We use two measures of educational outcomes at different levels of the school system. We find no significant effect of the school financing level. However, the level of relative teacher wages has significant positive effect on both test scores. This result is robust to instrumenting relative teacher wages with regional minimum wage levels. We also provide some evidence on the possible channels of this effect.