Editor's Choice The Aggregate Effect of School Choice: Evidence from a Two-Stage Experiment in India

We present experimental evidence on the impact of a school choice program in the Indian state of Andhra Pradesh that provided students with a voucher to finance attending a private school of their choice. The study design featured a unique two-stage lottery-based allocation of vouchers that created both student-level and market-level experiments, which allows us to study the individual and the aggregate effects of school choice (including spillovers). After two and four years of the program, we find no difference between test scores of lottery winners and losers on Telugu (native language), math, English, and science/social studies, suggesting that the large cross-sectional differences in test scores across public and private schools mostly reflect omitted variables. However, private schools also teach Hindi, which is not taught by the public schools, and lottery winners have much higher test scores in Hindi. Furthermore, the mean cost per student in the private schools in our sample was less than a third of the cost in public schools. Thus, private schools in this setting deliver slightly better test score gains than their public counterparts (better on Hindi and same in other subjects), and do so at a substantially lower cost per student. Finally, we find no evidence of spillovers on public school students who do not apply for the voucher, or on private school students, suggesting that the positive effects on voucher winners did not come at the expense of other students. JEL Codes: C93, H44, H52, I21, O15.