EDUCATIONAL VOUCHERS AND CREAM SKIMMING*

Epple and Romano (1998) show equilibrium provision of education by public and private schools has the latter skim off the wealthiest and most‐able students, and universal vouchers lead to further cream skimming. Here we study voucher design that injects private‐school competition and increases technical efficiencies without cream skimming. Conditioning vouchers on student ability without restriction on participating schools' policies fails to affect significantly cream skimming. However, by adding restrictions like tuition constraints, such vouchers can reap the benefits of school competition without increased stratification. This is accomplished while allowing voluntary participation in the voucher system and without tax increases.     

Efficiency of Junior High Schools and the Role of Proprietary Structure

Abstract: In this paper we deal with the role of proprietary structure in explaining efficiency within the Italian school industry. We analyze a sample of 497 schools located in Piemonte, a region in the North‐Western part of the country, distinguishing between public, private for‐profit and private nonprofit schools. In stage one of the analysis, we provide robust estimates of efficiency scores, using the two most widely known techniques in applied works, namely Data Envelopment Analysis (DEA) and Stochastic Frontiers (SF). In stage two, we suggests that proprietary structure matters in explaining efficiency. Nonprofit schools are more efficient than public ones, whereas for‐profit counterparts are outperformed by public producers. Moreover, we find that foreign and disabled students affects negatively efficiency, raising concerns for cream‐skimming practices among private producers. Finally, school size is another important determinant of efficiency.     

Entry into the Schooling Market: How is the Behaviour of Private Suppliers Influenced by Public Sector Decisions?

This research examines the location choice of private schools entering the California schooling market in 1979–80. We find that entrants are more likely to locate in public school districts with lower levels of per–pupil expenditure and higher fractions of public school students who reside in low–income households. In addition, we provide evidence of differences in the responsiveness of different types of private schools to the underlying conditions. Also, in comparing our results to those of previous research, we find that the determinants of the location choices of entrants appear to be the same as the determinants of the location pattern of incumbent private schools.     

Choice of Ontario high schools and student sorting by ability

To what extent can offering more choice in schooling lead to ‘cream skimming,’ or the sorting of students by ability? I study whether increased choice leads to student sorting by ability into high schools in the Greater Toronto Area. On average, 41% of students ‘opt out’ of the high school to which they would normally be assigned based on their residence. Students are more likely to opt out in areas where accessibility to other schools is greatest due to population density and explicit ‘open enrolment’ policies. While students of higher ability are generally more likely to opt out, an interaction term between school choice and ability is insignificant, suggesting that increased choice does not have differential impacts by student ability. Findings are robust to changes in assumptions about instrument exogeneity.     

The effects of upcoding,cream skimming and readmissions on the Italian hospitals efficiency: A population-based investigation

In this paper we analyze the effects of some distortions induced by the prospective payment system, i.e. upcoding, cream skimming and readmissions, on hospitals' technical efficiency. We estimate a production function using a population-based dataset composed by all active hospitals in an Italian region during the period 1998–2007. We show that cream skimming and upcoding have a negative impact on hospitals' technical efficiency, while readmissions have a positive effect. Moreover, the results indicate that private hospitals engage more in cream skimming than public and not-for-profit ones, while we observe no ownership differences regarding upcoding. Not-for-profit hospitals have the highest readmission index. Last, not-for-profit and public hospitals have the same efficiency levels, while private hospitals have the lowest technical efficiency.     

The effect of private high school education on the college trajectory

We use the National Education Longitudinal Study (NELS) to estimate the effect of private secondary schooling on the average college trajectory of a student in the United States, examining college enrollment and degree attainment across the private and public sectors. We provide the first estimates of the effect of private schooling on college degree attainment using the most recent NELS survey. To account for potential non-random selection we exploit the variation in the grade spans of the students’ middle schools. Results indicate that private schooling has a significant, positive effect on college enrollment and degree attainment. The effect on college enrollment diminishes with time, suggesting that private schools influence degree attainment by getting students to college sooner.     

School Finance Induced Migration and Stratification Patterns: The Impact of Private School Vouchers

This paper introduces a general equilibrium model of public school finance that includes: (i) multiple school districts that finance local public schools via property taxes set by majority vote; (ii) multiple neighborhoods within school districts where each neighborhood is characterized by a quality level of housing; (iii) local public schools that are obligated to admit all interested students who reside within the school district; (iv) private schools that function as clubs of parents who share the cost of the private school equally and who can choose to exclude others; (v) an educational production process that depends on both per pupil spending and average peer quality within the school; and (vi) individual peer quality levels that are correlated with the socioeconomic status of households. Since it allows for various degrees of imperfect stratification of residents across communities, the model is well suited for investigating empirically relevant migration forces induced by school finance reform proposals. The abstract model itself, however, is too complex to yield many analytic results. A computational counterpart to the model isnb therefore developed, calibrated to data, and utilized for policy experiments. In particular, the impact of vouchers in the context of different types of prevoucher educational finance systems is investigated, and it is found that migration patterns in general would cause vouchers to benefit public schools in poor communities while hurting public schools in wealthy communities.     

Competition Among Italian Junior‐Secondary Schools: A Variance‐Decomposition Empirical Analysis

The public economic theory emphasizes the potential role of competition in fostering the performance of educational systems. The rationale for pro‐competitive policies in education (i.e. vouchers, charter schools, tax deductions) is that schools can improve their quality responding to ‘pressures’ from nearby competitors. The objective of this paper is to analyze the potential relationship between (i) competition among schools and (ii) students’ achievement in Italy. While previous studies used OECD‐Pisa data for this purpose, here a new dataset about Italian schools has been employed: about 19,000 students in 150 schools constitute the sample. The reference framework is the idea that the presence of more schools in a certain area, and/or the proportion of students enrolled in private schools, should raise the performance of schools operating in that area through a ‘competition effect’. A multilevel strategy, which allows separating between‐areas variance in achievement scores, is employed. The findings support the view that competition has an impact, albeit little, on students’ achievement, and such competitive pressure is due to the number of schools, no matter if public or private.     

Learning Why More Learning Takes Place in Some Classrooms Than Others

Abstract. The relatively poor average performance of German students on the recent PISA international evaluations of 15- and 16-year-olds' literary skills (2000) and mathematical skills (2003) and the wide variation in performance, with low-income students scoring particularly poorly, have led to calls for reforms of the German educational system. Understanding why students in some classrooms learn more than do those in other classrooms is an important first step in considering alternative reform strategies. Possible explanations include differences in teacher quality, class sizes and peer groups, and also differences among the types of secondary schools that parents select for their children. This paper illustrates a set of techniques that are useful in examining the roles these factors play in predicting why, net of family background and prior achievement, the average achievement of children in some classrooms is much higher than that of children in other classrooms. We illustrate the use of these techniques with a dataset from Bogotá, Colombia, that has two attractive properties. First, some teachers teach multiple classes of students. Second, students are enrolled in schools in two sectors (public and private). Application of the techniques described in this paper could shed light on the reasons why the average academic achievement of German students attending some schools is much higher than that of German students attending other schools.     

TRACING THE EFFECTS OF GUARANTEED ADMISSION THROUGH THE COLLEGE PROCESS: EVIDENCE FROM A POLICY DISCONTINUITY IN THE TEXAS 10% PLAN

The Texas 10% law states that students who graduated among the top 10% of their high school class are guaranteed admission to public universities in Texas. We estimate the causal effects of this admissions guarantee on a sequence of connected decisions: students' application behavior, admission decisions by the university, students' enrollment choices conditional on admission; as well as the resulting college achievement. We identify these effects by comparing students just above and just below the top 10% rank cut off. We assume that other student characteristics and incentives are continuous at this cut off. We find that students react to incentives created by the admissions guarantee—for example, by reducing applications to competing private universities. The effects of the admissions guarantee depend on the university and the type of students it attracts. The 10% law is binding and alters the decisions of the admissions committees. We find little evidence that the law increases diversity or leads to meaningful mismatch for the marginal student admitted. (JEL I23, I28)     

SCHOOL CHOICE: SUPPORTERS AND OPPONENTS

We examine the attitudes of Ohio homeowners about school choice, which includes open enrollment programs, school vouchers, tuition tax credits, and charter schools. Previous studies examine more limited forms of choice and investigate fewer possible influences. Overall we report at least five new findings and five findings that contradict previous studies. We find the strongest predictors of opposition for school choice are people having graduate degrees and living in high‐performing public school districts. We find people living in blue collar areas and using private schools to be the strongest predictors of support. Males tend to oppose choice and African Americans support it. We find no role for income, the convenience of alternative schools, or the protection of house values in support for school choice. Overall we report at least five new findings and five findings that contradict previous studies. (JEL H44, I22)     

A quantitative analysis of Turkish Private Education Reform

A recent education policy Turkish government is wishing to undertake is to shut down all private supplementary education centers (SECs) unless SECs manage to convert into a private school. With this policy, the government is willing to increase equality of opportunity among students. We show quantitatively that the policy, in fact, leads to a decrease in equality of opportunity since SECs are given the option to convert into private schools. We use a political economy model of education at which households, heterogeneous with respect to exogenously set income, choose among a continuum of private schools differentiated by tuition and a public school. Households choosing the public school can privately supplement their child's education spending in any amount. Public school is free of charge, and its spending is financed by income tax revenue collected from all households. Income tax rate is determined by majority voting. Achievement of a child depends only on educational spending. We calibrate the model's parameters by matching certain targets from 2013 Turkish data. We then exogenously restrict the supplemental education spending to zero in a counterfactual experiment. We find that variance of achievement (or inequality of opportunity) increases by 23.51% and mean achievement decreases by 1.74%.     

When do better schools raise housing prices? Evidence from Paris public and private schools

In this paper, we investigate how housing prices react to the quality of education offered by neighboring public and private schools. The organization of secondary schooling in the city of Paris, which combines residence-based assignment to public schools with a well-developed and almost entirely publicly funded private school system, offers a valuable empirical context for analyzing how private schools affect the capitalization of public school performance in housing prices. Using comprehensive data on both schools and real estate transactions over the period 1997–2004, we develop a matching framework to carefully compare sales across school attendance boundaries. We find that a standard deviation increase in public school performance raises housing prices by 1.4 to 2.4%. Moreover, we show that the capitalization of public school performance in the price of real estate shrinks as the availability of private schools increases in the neighborhood. Our results confirm the predictions of general equilibrium models of school choice that private schools, by providing an advantageous outside option to parents, tend to mitigate the impact of public school performance on housing prices.     

The impact of charter school attendance on student performance

We employ a panel of individual student data on math and reading test performance for five cohorts of students in Texas to study the impact of charter school attendance. We control for school mobility effects and distinguish movement to a charter school from movement within and between traditional public school districts. We find students experience poor test score growth in their initial year in a charter school, but that this is followed by recovery in the subsequent years. Failure to account for this pattern may lead to potentially misleading estimates of the impact of charter attendance on student achievement. Students who remain in charters largely recover from the initial disruption within approximately 3 years, and there is weak evidence that there may be overall gains from charter attendance within this period. Furthermore, students who return to traditional public schools after just 1 or 2 years in a charter do not appear to suffer a lasting negative impact despite their poor average performance in their first year of charter attendance.     

Private Tutoring: Evidence from India

Drawing on the nationally representative “Participation and Expenditure in Education” surveys, we document the incidence and cost of private tutoring at different stages of schooling over the last two decades in India. As private tutoring involves two decisions: (1) whether to take private tuition or not, and (2) how much to spend on private tutoring conditional on positive decision in (1), we analyze the determinants of the two decisions separately using a Hurdle model. We find that private tutoring is not a new phenomenon in India: a significant proportion of students at each stage of schooling took private tutoring even in 1986/87, and there has been no dramatic increase in those proportions. Students from urban areas, private schools, and from better economic backgrounds are more likely to take private tutoring. Furthermore, the demand for private tutoring is inelastic at each stage of schooling, which implies that private tutoring is a necessary good in the household consumption basket. We also find evidence of pro‐male bias in both decisions regarding private tutoring.     

Public education expenditures and private school enrollment

In this paper, I investigate whether increases in public education expenditures lead to reductions in private school enrollment. In order to deal with the endogeneity of public expenditures, I use as a natural experiment the 1998 FUNDEF reform in Brazil that caused exogenous variations in local public school funding. Using data from Brazilian School and Population censuses, I show that public education expenditures increases are associated with reductions in the share of private school enrollment for grade 1. However, the effect is smaller for grades 2 to 4, which is consistent with the existence of costs associated with switching schools.     

Optimal collective contract without peer information or peer monitoring

If entrepreneurs have private information about factors influencing the outcome of an investment, individual lending is inefficient. The literature typically offers solutions based on the assumption of full peer information to solve adverse selection problems and peer monitoring to solve moral hazard problems. In contrast, I show that it is possible to construct a simple budget-balanced mechanism that implements the efficient outcome even if each borrower knows only own type and effort, and has neither privileged knowledge about others nor monitoring ability. The mechanism satisfies participation incentives for all types, and is immune to the Rothschild–Stiglitz cream skimming problem despite using transfers from better types to worse types. The presence of some local information implies that the mechanism cannot be successfully used by formal lenders. Thus a local credit institution can emerge as an optimal response to the informational environment even without peer information or monitoring. Finally, I investigate the role of monitoring in this setting and show how costly monitoring can increase the scope of the mechanism.     

To Segregate or to Integrate: Education Politics and Democracy

How is the quality of public education affected by the presence of private schools for the rich? Theory and evidence suggest that the link depends crucially on the political system. We develop a theory that integrates private education and fertility decisions with voting on public schooling expenditures. We find that the presence of a large private education sector benefits public schools in a broad-based democracy where politicians are responsive to low-income families but crowds out public education spending in a society that is politically dominated by the rich. The main predictions of the theory are consistent with state-level data and micro data from the U.S. as well as cross-country evidence from the Programme for International Student Assessment study.     

The effects of generalized school choice on achievement and stratification: Evidence from Chile's voucher program

In 1981, Chile introduced nationwide school choice by providing vouchers to any student wishing to attend private school. As a result, more than 1000 private schools entered the market, and the private enrollment rate increased by 20 percentage points, with greater impacts in larger, more urban, and wealthier communities. We use this differential impact to measure the effects of unrestricted choice on educational outcomes. Using panel data for about 150 municipalities, we find no evidence that choice improved average educational outcomes as measured by test scores, repetition rates, and years of schooling. However, we find evidence that the voucher program led to increased sorting, as the “best” public school students left for the private sector.     

Private or public school advantage? Evidence from 40 countries using PISA 2012-Mathematics

It is known that in most countries, private school students outperform students in public schools in international assessments. However, the empirical literature recognizes that assessing the true effect of private school attendance requires addressing selection and sorting issues on both observabland unobservables. The existing empirical evidence on the private school effect mostly covers OECD and Latin American countries, with little evidence on other parts of the world. There is recent emerging country-specific evidence doubting the existence of a private school advantage. I use PISA 2012 data for Mathematics and two different methodologies to derive baseline and bias-corrected estimates of the private-dependent and independent school effect for 40 countries. A robust private school advantage is found only in a handful of countries. Public schools generally perform as well as private subsidized schools and outperform independent schools. Accounting for both peer effects and selection is necessary when evaluating school effectiveness, especially in the case of independent schools.