The surprising effect of larger class sizes: Evidence using two identification strategies

• This paper studies the effect of class size on 15 year olds' educational mathematical ability.
• It uses PISA data for the USA and the UK.
• It addresses the endogeneity of class size with two identification strategies.
• As well as conventional IV it uses restrictions on higher moments of the distribution of the error terms.
• Both approaches (and OLS) lead to the result that bigger classes lead to better results.

This paper estimates the marginal effect of class size on educational attainment of high school students. We control for the potential endogeneity of class size in two ways using a conventional instrumental variable approach, based on changes in cohort size, and an alternative method where identification is based on restrictions on higher moments. The data is drawn from the Program for International Student Assessment (PISA) collected in 2003 for the United States and the United Kingdom. Using either method or the two in conjunction leads to the conclusion that increases in class size lead to improvements in student's mathematics scores. Only the results for the United Kingdom are statistically significant.