THE REGULATION OF PRIVATE SCHOOLS SERVING LOW‐INCOME FAMILIES IN HYDERABAD,INDIA: AN AUSTRIAN ECONOMIC PERSPECTIVE1

It is the intention of government that private schools in Hyderabad are prevented by regulation from exhibiting the basic manifestations of competitive markets ‐ low prices, innovation, good service and so on. However, private schools do, in practice, manifest these features. This paradox is resolved because regulations are not enforced in practice, with the acceptance of bribes by government officials being common. As a result of ‘extra‐legal’ activity, private schools are able to offer a better service to the poor than if regulations had been enforced.