Overall Variance Decomposition
Past analyses of educational production functions have looked at both the level and the growth in achievement. The advantage of the growth formulation is that it eliminates a variety of confounding influences including the prior, and often unobserved, history of parental and school inputs. This formulation, frequently referred to as a value-added model, explicitly controls for variations in initial conditions when looking at how schools and other factors influence performance during, say, a given school year.4 However, standard value added models do not account for unobservable factors that affect the rate of acquisition of new knowledge, and it is the availability of test score measures for more than two grades that enables us to control for such influences through the use of fixed effects models for achievement growth.
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