The effect of funding for disadvantaged students on academic underachievement

We estimate the effect of school funding for disadvantaged students on academic underachievement in primary education. For this purpose, we exploit a policy in Belgium that granted additional funding for schools with a share of disadvantaged students of at least 10%. Combining stochastic frontier analysis (a method to measure efficiency) with regression discontinuity design, we find that while additional funding does not affect achievement, it does help reduce underachievement. As a result, the policy has helped bringing students impacted by it closer to realizing their full potential compared to their peers who were not included in the policy. From a policy perspective, our findings indicate that maintaining targeted remedial measures is essential for enhancing effectiveness. Additionally, we emphasize the importance of analyzing both underachievement and achievement.