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School district consolidation: Market concentration and the scale‐efficiency tradeoff

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  • Timothy J. Gronberg
  • Dennis W. Jansen
  • Mustafa U. Karakaplan
  • Lori L. Taylor

Abstract

Consolidation is often proposed as a strategy for increasing school district quality without increasing educational funding. However, if consolidation reduces competition in the local school market and reduces efficiency, any savings from exploiting economies of scale may be lost to increased inefficiency. We use a stochastic cost function to investigate these effects for districts in Texas. We find important economies of scale, but we also find that increased market concentration leads to increased cost inefficiency. Finally, we illustrate the practical importance of these two potentially offsetting factors in a simulation that considers consolidating Texas school districts to county‐level districts. We find that failure to consider the effect on competition can lead to large overestimates of the benefits of consolidation.

Suggested Citation

  • Timothy J. Gronberg & Dennis W. Jansen & Mustafa U. Karakaplan & Lori L. Taylor, 2015. "School district consolidation: Market concentration and the scale‐efficiency tradeoff," Southern Economic Journal, John Wiley & Sons, vol. 82(2), pages 580-597, October.
    • Handle: RePEc:wly:soecon:v:82:y:2015:i:2:p:580-597
    DOI: 10.1002/soej.12029
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    4. Michael S. Kofoed & Christopher Fawson, 2021. "A neighborly welcome? Charter school entrance and public school competition on the capital margin," Public Choice, Springer, vol. 188(1), pages 75-94, July.

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