The causal effect of class size on scholastic achievement: distinguishing the pure class size effect from the effect of changes in class composition *

As in many other countries the causal effect of class size on pupils’ schoolperformance is an important issue in the ongoing educational debate in theNetherlands. In 1997 the Dutch government committed to undertake a majorinvestment to reduce average class size in primary schools. Although opinionleaders and politicians were easily persuaded that this is a good investment,this measure is not backed by convincing empirical evidence pertaining to theDutch situation. In the process of policy preparation one study was publishedsupporting the reduction of class size, but as we will show in this paper theresults of this study should be questioned.Traditionally, the studyof theeffect of classsizeon schoolperformancehasbeen dominated by educational researchers. Only recently economists enteredthiseld.AnotableearlyexceptionistheinuentialsurveyarticlebyHanushek(1986)who,afterreviewingalargenumberofstudies,concludesthatthereisnopositive effect of schooling expenditures on pupils’school performance.The key methodological problem to assess the causal effect of class size onpupils’school performance, is that assignment of pupils to classes of differentsizes need not be random. Consequently, differences in performance between