Aggregate versus Disaggregate Data in Measuring School Quality

Notes
1 Although the aggregate estimate is theoretically unbiased, a test for bias similar to Hanushek
and Taylor’s was performed. Hanushek and Taylor find that aggregation biases downward the
estimated school effects. They reestimate the value-added equation entering an estimate of
school quality as a fixed effect. Bias of the school effect estimate is measured by deviations of
the coefficient of school quality from one. In our Monte Carlo study, rather than an estimate, the
true school effects can be used, and therefore, a generated regressor problem is avoided. No
evidence of bias is found and thus Hanushek and Taylor’s finding of bias is apparently due to a
bias in the construction of their test rather than due to aggregation.
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