Comparing funding and performance within the Dutch educational system

Abstract

In this paper, the relationship between governmental funding and student performance within the Dutch educational system is analyzed. The differences in the funding systems and the effects of funding on student achievement between the secondary level of education and the tertiary level of education is determined. Through this approach, the effectiveness of a funding system based on performance variables can be contemplated. The measurements are done by regressing performance variables, such as grades and graduation rates, on government funding variables. Results show that within the 2nd level of education, funding has a jointly significant positive effect on average grades and on average graduation rates. This means that additional government funding, increases student performance. In particular, funding from one year prior has a positive impact on performance, showing that Dutch secondary schools are not only using their funds for current costs, but also for investing. Within tertiary education, a similar, but weaker effect is found. These findings are in line with previous literature where in general a positive relationship has been established between funding and performance. The literature also shows that educational institutions where a performance funding system is in place, this relationship is far weaker or does not exist at all. Also recognizing the potential side effects of such a system, the Dutch government has been criticized by external researchers for making higher educational institution’s funding too dependent on performance variables. This thesis supports these claims and forms a base for further research on the topic.